Edgar Filing: BIOPHAN TECHNOLOGIES INC

U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-KSB
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(Mark One)

[X] Annual Report Under Section 13 or 15(d) of The Securities Exchange
Act of 1934

For the fiscal year ended February 29, 2004.
or

[ ] Transition Report Pursuant to Section 13 or 15(d) of The
Securities Exchange Act of 1934

For the transition period from________to__________.

Commission File Number 0-26057

BIOPHAN TECHNOLOGIES, INC.
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(Name of small business issuer in its charter)

NEVADA 82-0507874
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)

150 LUCIUS GORDON DRIVE, SUITE 215
WEST HENRIETTA, NEW YORK 14586
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(Address of principal executive offices) (Zip code)

(585) 214-2441
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Issuer's telephone number

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.005 par value

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

Yes [X] No [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10- KSB or any
amendment to this Form 10-KSB. [X]

The issuer had $75,000 of revenues for its most recent fiscal year ended
February 29, 2004.

The aggregate market value of the voting equity held by non-affiliates computed
by reference to the average bid and asked prices of such common equity as of May
12,2004 was $63,821,929.

The number of outstanding shares of the issuer's Common Stock, $.005 par value
as of May 12,2004 was 68,695,110 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Not applicable.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

TABLE OF CONTENTS

Page

PART I

Item 1. Description of Business 1

Item 2. Description of Property 20

Item 3. Legal Proceedings 20

Item 4. Submission of Matters to a Vote of Security Holders 20

PART II

Item 5. Market for Common Equity and Related Stockholder Matters 20

Item 6. Plan of Operation 22

Item 7. Financial Statements 26

Item 8. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure 27

Item 8A Controls and Procedures 27

PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 27

Item 10. Executive Compensation 32

Item 11. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters 34

Item 12. Certain Relationships and Related Transactions 36

PART IV

Item 13. Exhibits and Reports on Form 8-K 38

Item 14. Principal Accountant Fees and Services 43

SIGNATURES 44

PART I

ITEM 1. DESCRIPTION OF BUSINESS

COMPANY BUSINESS

Our core business is providing technology that will enable both
implantable medical devices such as pacemakers, and interventional devices such
as minimally-invasive surgical tools, to be used safely and effectively in
conjunction with Magnetic Resonance Imaging (MRI), thereby enabling surgical
procedures to be performed under real-time MRI guidance. We recently expanded
our focus in the MRI arena to improve the ability of the healthcare industry to
provide imaging under MRI by reducing the image artifacts caused by many devices
that are otherwise safe to use with MRI, such as stents, screws, nuts, bolts,
wires, spinal supports, and shunts. These devices are usually difficult if not
impossible to view under MRI. We have published research with scientists from
the University of Rochester demonstrating that our nanomagnetic particle coating
technology can alter the signal received by an MRI device and can help make
devices more visible. We have further expanded our technology offerings to
provide materials which we believe will enable improved contrast agents for use
in MRI diagnostics.

We intend to supply our technologies primarily to large, well established
biomedical and biotechnology companies but do not deliver end user products. FDA
testing and approval requirements will be undertaken by our customers in the
context of the approval of their products, although our product designs and
manufacturing processes are designed to facilitate and enhance FDA approval.

BACKGROUND TERMS, FACTS, AND ASSUMPTIONS:

MRI is widely considered to be the premiere non-invasive imaging method
due to the following capabilities:

o Superb soft tissue contrast.
o No ionizing (x-ray) radiation that can cause cancer.
o No toxic contrast agents such as those used in some x-ray procedures
to highlight specific tissues that can cause allergic or other
reactions.
o Images are not obstructed by bone.
o Multi-plane images (`slices' having different orientation in the
body) can be obtained without repositioning the patient.
o The ability to use MRI to guide surgical procedures.

Due to these and other advantages, we believe the use of MRI will continue
to increase and our technologies will be attractive to commercial partners. As
the technology continues to evolve, MRI systems using higher power levels will
provide better image quality.

Pacemakers

Exposing pacemaker patients to MRI creates risks and liabilities that can
include fatalities. We have developed a solution that can substantially reduce
these risks for patients with pacemakers, that can be affordably implemented by
pacemaker manufacturers. We have received offers for exclusive licenses for our
technology which we have rejected. We rejected these offers because we believe
they were not in line with industry pricing, given the improvements in product
safety and marketing advantage that our technology offers, and did not provide
an equitable return for our stockholders who have funded our research. However,
we continue to be in discussions with several manufacturers concerning the
licensing of this technology.

We believe that our pacemaker solution can provide our prospective
licensees with the opportunity to increase their market share by offering safer
devices, as well as reduce potential liabilities from continuing to offer
products with known safety risks. Biophan's MRI-safe technology platforms could
make this possible in a way that requires minimal changes to existing product
designs, minimal incremental cost for materials, and requires very minor
modifications to existing product manufacturing processes.

FDA regulations and manufacturer labeling for pacemaker devices include
strict contraindications against use in an MRI environment (See Achenbach S, et
al Am Heart J 1997;134:467-473; ECRI, Health Devices Alert, May 27,1988, pp. 1;
Shellock FG, Reference Manual for Magnetic Resonance Safety: 2002 edition,
Amirsys, Inc., Salt Lake City, 2001; Zaremba L. FDA guidance for MR system
safety and patient exposures: current status and future considerations /
Magnetic resonance procedures: health effects and safety. CRC Press, Boca Raton
Fl, pp. 183-196, 2001). Contraindication means that a particular action or
procedure, in this case, use in an MRI environment, is inadvisable. This
pacemaker contraindication is based on evidence that induced electrical currents
in the pacemaker lead can falsely pace the heart rapidly, can damage the device
itself, and can create localized heating that causes tissue damage that may
degrade the effectiveness of the pacing system. Independent description of these
problems can be found in the following references:

1. Experimental studies showing that pacemaker electrodes could heat up to
100 C (increase of 63.1 C) within 90 seconds of MRI scanning: S. Achenbach, et.
al. "Effects of MRI on Cardiac Pacemakers and Electrodes, American Heart
Journal, 1997, 134, 467-473.

2. Professional opinion that "In practice, it is not possible to design a
device for use in an MR environment, incorporating long metallic parts such as
guidewires, mechanical cables, or electrical leads, and be completely sure of
safety." Conclusions from experimental studies showing 74 C (and higher)
temperature increases in guidewires after 30 seconds of MR scanning. M. Konings,
et. al. MEDICA MUNDI, 45/1, March 2001, page 35.

3. Experimental data indicating a maximum temperature of almost 90 C and
myocardial necrosis (that) could be demonstrated in histological studies. F.
Duru, et. al. Pacing in MRI environment: Clinical and technical considerations
on compatibility. Eur Heart J, 2001, 22: 113-124.

A conservative estimate of pacemaker population worldwide is 2.5 million
(See Barbaro, V.; Bartolini, P., and Bernarducci, R. Biomedical Engineering
Laboratory, Istituto Superiore di Sanita, Rome, Italy. ingbio:net.iss.it 2.5
million in 1997 and growing annually). Another reference ("Interference in
Implanted Cardiac Devices, Part II" by Sergio L. Pinski and Richard G. Trohman,
October 2002, PACE, Vol. 25, No. 10) cites a Japanese survey in which 17% of
Japanese pacemaker patients stated that they presented conditions for which MRI
would have been recommended if the device (pacemaker) had not been present.
Since the practice of medicine in Japan reflects standards of care in the US and
other countries where the use of pacemakers is widespread, it is reasonable to
use the 17% figure across the worldwide population of pacemaker patients
(2,500,000) to reach a number of 425,000 people who have at some time in the
past been denied access to MRI diagnosis as a result of their pacemaker implant.
Biophan has taken a conservative approach to these numbers and estimated that at
least 300,000 pacemaker patients have been denied an MRI. However, currently no
pacemaker patient can safely undergo an MRI and FDA regulations and manufacturer
labeling for pacemaker devices include strict contraindication against use in an
MRI environment.

Our solution is a combination of a patented radio frequency (RF) filter
which we license from Johns Hopkins University, exclusively for implantable
medical devices. We have demonstrated that this RF Filter, placed at the distal
end of the pacemaker lead near the electrode that paces the heart, eliminates
well over 90% of the heating that occurs in tissue near the pacemaker electrode.
Without the filter, this heating may cause tissue scarring where the pacemaker
electrode connects to the heart tissue, and that scarring can subsequently cause
the pacemaker to have difficulty sensing the heart signal, and when the heart
needs to be paced by the device, the scar tissue may impede the signal's ability
to pace the heart. The RF energy in the MRI machine is the direct cause of the
heating. The Johns Hopkins patented RF filter permits the high frequency energy
that causes tissue heating to be blocked, while allowing the lower frequencies
that monitor the heart and pace it to pass through. This type of filter is
called a low-pass filter.

A second problem in pacemakers exposed to MRI is caused by the gradiant
field, which sweeps across the body rapidly during the MRI procedure, and is the
cause of the loud sound that one hears during an MRI procedure. This gradiant
field produces an energy field which is important in producing the MRI image. As
it passes across a pacemaker lead this energy can cause a small voltage to be
induced in the pacing lead. This voltage can cause the heart to beat. The
gradiant field can cause heartbeats of 200 to 300 beats per minute, which
interferes with proper blood pumping, and can lead to potentially fatal
conditions, including fibrillation. Biophan has developed and filed patents for
a very low cost solution to this problem which we have demonstrated eliminates
the voltage levels that can pace the heart.

These solutions will be used on the lead that connects the implanted pulse
generator, or pacemaker, to the electrodes that are placed in the internal heart
wall. In order to eliminate risks associated with MRI for current pacemaker
patients, the existing lead would need to be removed and replaced with a new
lead. This removal procedure is typically not done due to associated risks to
the patient. As a result of this, our pacemaker technology is intended primarily
for future products, not previously implanted pacemakers. Approximately 600,000
people receive a pacemaker implant annually, and our technology could
potentially be applied to the majority of these devices if it were adopted by
all pacemaker and lead manufacturers worldwide. See http://biomed.brown.edu/
Courses/BI108/BI108_1999_Groups/Cardiapacing_Team/economics.html.

Other Devices

Other medical devices also contraindicated for use with MRI could be made
safe with Biophan's technologies. (See "The Reference Manual for Magnetic
Resonance Safety, by Dr. Frank G. Shellock, 2002 edition, Amirsys Inc., ISBN
1-931-884-00-5). Technologies currently under development by us for MRI safety
and compatibility provide the following advantages to devices that use them:

o Reduction of heating to long metallic components resulting from
radio frequency energy and pulsed magnetic fields used in MRI;

o Reduction of electrical currents induced in metallic components
resulting from radio frequency energy used in MRI; and

o Reduction of MRI distortion resulting from metallic or other
conductive components in or near the body area being imaged.

Pacemakers are one example of implanted devices used to control organ
function. Other cardiac-related devices, such as implantable cardioverter
defibrillators, are used to not only pace, but also to help the heart recover
from episodes of dangerously high pulse rate (cardioversion) and from random
chaotic behavior (defibrillation). Other stimulation devices are used to help
organize the contraction of the four heart chambers to reverse the effects of
congestive heart failure (CHF). Neurostimulators are being used to stimulate
brain tissue and eliminate symptoms of Parkinson's disease. Electrical
stimulators are also being used for bladder dysfunction and the treatment of
obesity. All of these devices use electrical leads similar to those in
pacemakers. These devices are subject to the same heating and electrical
currents and can benefit from the technologies being developed by Biophan.

Guidewires

Guidewires are used for surgical placement of leads used with pacemakers
and other implantable devices, placement of catheters for short-term use, and
placement of more permanent devices such as stents within the circulatory
system. These guidewires typically use long metal wires for reasons of strength,
flexibility, and reliability. The use of guidewires benefits from direct,
real-time visualization. MRI is preferred in many cases due in part to the fact
that x-ray imaging exposes patients and physicians to radiation, and due to the
improved soft-tissue imaging available with MRI. However, guidewires and long
wire components in catheters are subject to the same problems associated with
pacemaker leads when used in MRI. Thus, our technologies being developed can
also provide benefits to these devices. MRI safe and image compatible guidewires
would allow certain procedures that today are conducted using X-Ray, fluoscopy
and/or CAT scan to be performed using MRI. With these imaging devices, the
patient and the physician are today exposed to dangerous ionizing radiation.
Because it does not use ionizing radiation and generally provides improved
visibility, MRI will be an attractive alternative once the MRI limitations we
are addressing are resolved.

We are presently in the process of establishing one or more partnerships
to complete the development process for our technologies. These partnerships may
be with one or more companies involved in the manufacture and sale of:

o components such as pacemaker leads;

o active devices such as pacemakers that make active use of wires to
conduct data and stimulating pulses;

o passive devices such as guidewires that only make use of the
physical properties of the wire elements in them; and

o MRI diagnostics systems.

All of these potential business relationships are being pursued with the
interest of funding the remaining development work, supporting necessary
clinical trials and approvals, and ultimately resulting in a license for
manufactured products with royalties coming to Biophan. Consistent with our
business strategy, on September 25, 2003, we entered into a development
agreement with Boston Scientific Corp., a medical device manufacturer, to
develop MRI capability for one of their products. Additionally, our negotiations
with other biomedical device manufacturers and our evaluation of their proposals
is continuing.

We recently completed financing that allows us the ability to continue
developing these solutions in parallel with our efforts to close additional
customers. Our R&D continues to produce know-how and new patent applications,
and helps us demonstrate capabilities that improve our ability to close
additional customers. We are currently in discussions with multiple divisions of
several medical device companies, as well as MRI manufacturers.

An MRI procedure may be crucial to diagnosing colon cancer, a brain tumor,
or a host of other serious, life threatening problems. The existence of a
medical device that is not MRI safe and compatible requires physicians and
patients to make a very difficult decision to either forego the MRI, or risk
serious injury and potential death from undergoing MRI with a pacemaker,
neurostimulator, or other implantable device installed. See the following
references for information relating to patient deaths:

1. FDA Medical Device Report (MDR) records of pacemaker patient deaths
during or shortly after an MR exam. FDA Medical Device Records (MDRs) # 351516,
748838, 175218, and 1259381.

2. Pacemaker patient who died 15 minutes after MRI scan of the brain.
"Fiber Optics May Allow Pacemaker Users To Undergo MRIs Without Health Threat."
The Wall Street Journal, Feb 22, 2002. D. Pennell, M.D. Imperial College,
London.

3. Pacemaker patient who suffered severe brain damage and death following
an MRI exam. Loss prevention case of the month. "Not my responsibility!" Journal
of the Tennessee Medical Association. 1988;81(8): 523, J. K. Avery, M.D. St.
Thomas Hospital, Nashville, TN.

TECHNOLOGY

A brief description of the terms used to describe our technologies may be
helpful and is presented below.

o The term "MRI safe" refers to a situation in which MRI testing will
cause no harm to the patient or to any implantable or interventional
device within them.

o The term "MRI compatible" refers to a situation in which image
interference is minor, and the resulting MRI image is useful in
diagnosing the patient's state of health.

o The term "active" refers to an implantable device or surgical
implement that uses optical, electrical, and/or other energy to
sense or transmit information, and/or modify or treat diseased
tissue. Examples include pacemakers and related devices, catheter
imaging devices, and drug pumps, all of which may be affected during
MRI.

o The term "passive" refers to an implantable device or surgical
implement that does not transmit information but serves to move,
secure or modify tissue or another device, and does so via its
mechanical action or presence only.

o Carbon composite materials consist of ultra-fine whiskers of carbon
dispersed in a plastic material. The resulting material has the
ability to absorb and/or reflect electromagnetic energy at
frequencies that relate to the size of the whiskers. This material
can be extruded and molded to make components.

o Nanomagnetic materials consist of ultra-fine particles of magnetic
material (such as iron) embedded in a ceramic material. These
particles are so small that they behave differently than they would
in a continuous layer or solid. The choice of magnetic and ceramic
materials, particle sizes, and layer thickness permit "tuning" the
nanomagnetic layer to reflect and/or absorb specific frequencies of
energy. They are also so thin that they can flex without breaking
and are extremely tough.

o Filtering technology that essentially blocks unwanted induced
currents at both ends of a catheter or other device.

o Photonic technology that uses miniature diode lasers and photocells
at each end of a catheter or pacemaker lead or surgical device to
transmit energy and information without any electrical conductors.
Diode lasers are semiconductor devices that can be as small as the
size of a grain of salt that convert an electrical pulse to light at
a single frequency or color. Photocells reverse this process and can
also be very small. By integrating these elements carefully at each
end of an optical fiber, we can send power and information without
the use of wires. This technology has been made very reliable and
cost effective by development in support of the telecommunications
industry. We have successfully paced an animal's heart with our
prototype of a photonic pacemaker lead, and demonstrated that it
does not heat up or alter voltages. Discussions with pacemaker
manufacturers regarding this technology caused us to shift focus to
our current solutions, described earlier. Our photonic technology
has potential in other devices, such as intraluminal catheters,
described in the following paragraph.

o A further application of photonics is in intraluminal imaging. This
is an extension of MRI imaging where the MRI receiver coil that is
traditionally outside the body, is reduced to a very small size
(microcoil) so that it can be placed inside (intra) a body cavity or
blood vessel (lumen). This can provide significant improvements in
resolution. We believe the performance and safety of these
microcoils can be greatly improved by using our photonic technology
to replace the wires currently being used by researchers to connect
them to the external MRI system.

RESEARCH AND PRODUCT DEVELOPMENT ACTIVITIES

We are developing technology that will enable patients with implanted
biomedical devices to safely undergo MRI. The research and development expenses
incurred by us were $113,144 for the fiscal year ended February 28, 2001;
$949,124 for the fiscal year ended February 28, 2002, $1,373,124 for the year
ended February 28, 2003, and $1,240,439 for the year ended February 29, 2004.

We are committed to the development of MRI-safe solutions for pacemakers
and other biomedical devices.

We have also demonstrated that fiber-optic systems can be used to replace
metal wire leads in devices, and that the fiber-optic systems resolve the
problems of heating and induced voltages. We have also created concepts and
filed patent applications dealing with the use of fiber-optic systems to provide
power and signal handling capability to MRI microcoils that can be used to image
within arteries and other body cavities. Initially, we also planned to develop a
photonic temporary pacemaker ourselves, through clinical trials, FDA approval
and into commercial use.

At this time we are not pursuing further development of the fiber-optic
systems until funded by one or more industry partners. We are maintaining the
intellectual property and we remain interested in licensing or development
opportunities. We are continuing to explore other potential uses of fiber-optic
leads as an alternative to metal wire leads in implantable applications and in
minimally invasive surgery. Wilson Greatbatch, the inventor of the first
successful pacemaker, is a co-inventor on several of these patents, and he
developed a fiber-optic pacemaker device which was successfully tested in
animals and was able to successfully pace the animal's heart.

Our current research efforts are focused on demonstrating the feasibility
of our coating and filtering solutions that we intend to license to medical
device manufacturers. Initial tests of these solutions have been promising
enabling us to have discussions with several companies regarding potential
development arrangements. Consistent with our business strategy, on September
25, 2003, we entered into a development agreement with Boston Scientific Corp.,
a medical device manufacturer, to develop MRI capability for one of their
products. Preliminary results from this activity are encouraging and moving
towards the contractual goals. Additionally, our negotiations with other
biomedical device manufacturers and our evaluation of their proposals is
continuing. These coating and filtering solutions are significantly less
expensive to implement than our fiber-optic solution. The coating and filtering
solutions do not use any additional battery power, whereas the fiber-optic
solution is more energy intensive.

The results of tests regarding pacemaker solutions are discussed below.
Until these tests were recently completed, it was not clear if these solutions
could solve the MRI safety issues of pacemakers and other devices. With the
initial results we have achieved, it appears that these solutions can
significantly reduce the heating and other problems that have caused the MRI
contraindications of many devices. Our discussions with major manufacturers of
pacemakers and other devices have indicated a strong preference for
coating/filtering solutions versus photonic solutions for several reasons
including battery life and ease of engineering redesign. To date, we have
received licensing interest in our technology, and several offers from one of
the pacemaker companies. We are in discussions with several guidewire and
neurological device companies.

Our original focus was solely on pacing technology. However, following the
testing of our coating and filtering technologies and the corresponding positive
feedback from medical device manufactures, both inside and outside the pacing
industry, we believe our potential market has been significantly increased. This
increase is a result of developing technology that could be utilized by medical
devices, including guidewire, catheter, prosthetic devices, stents, biopsy
needles, and neurological devices in addition to pacemakers. As the
coating/filtering technology does not require a complete product redesign, and
manufacturers have indicated a preference for this technology, we believe the
time to commercialize our technology has been reduced. Further, we anticipate
that additional manufacturers will partner with us in developing the technology,
thereby reducing our capital requirements.

The fiber-optic lead has been tested in an MRI machine and does not heat
up as do existing catheters that contain metal wires. We are exploring the use
of this technology with third parties, under license, for use in deep brain
stimulation applications, such as treating movement related disorders like
Parkinson's disease and epilepsy. We have also received OEM licensing interest
from several companies wishing to use the fiber-optic lead to power intraluminal
coils. We are anticipating one or more R&D contracts to help finance the
development of this product that is based upon Biophan's photonic technology
platform.

Nanomagnetic Particle Coatings

We have licensed, on an exclusive basis, issued patents for shielding and
electromagnetic interference (EMI) filtering technologies that include the use
of carbon composite and nanomagnetic particle technologies.

We have obtained a license from Johns Hopkins University for an issued
patent for an MRI-safe electrocardiogram and pacemaker lead. The license is
exclusive to us for implantable devices and also covers other market segments.
This technology provides a low-pass radio frequency (RF) filter at the electrode
tip in the heart that permits conduction of pacemaker signals but blocks
high-frequency MRI electromagnetic signals that cause problems in implanted
devices.

Two tests of our technologies were recently conducted in active MRI
imaging systems at imaging centers located in Western New York. The first test
showed a reduction of thermal heating caused by an MRI machine on a metal wire
similar to a pacing lead that is protected by one of our MRI technologies. The
control sample heated over 22 degrees Centigrade in less than one minute. With
the Biophan technology added, the heating was reduced to about 1 degree
Centigrade, below the level that can cause tissue damage and well within FDA
safety guidelines. The second test showed a reduction of 89% in the electrical
energy induced in a metal object by the MRI radio frequency field after our MRI
safety technology is added to the sample.

The two tests of Biophan's coating and filtering technology were conducted
on November 11, 2002 and February 13, 2003. These tests were performed in an
actual MRI chamber at the University Medical Imaging Center (UMI), located at
4901 Lac de Ville Boulevard, Rochester, New York. Both tests were run by Biophan
and UMI personnel.

We have also filed patents for reducing the energy output of an MRI
machine in order to minimize the energy that causes lead heating. The
combination of shielding, filtering, and MRI output reduction could possibly
result in solving the MRI heating problem in both active medical devices (e.g.,
pacemakers, defibrillators), and passive medical devices (e.g., catheters and
guidewires).

We conduct our R&D and prototype development through sub-contract
arrangements with third parties.

Biophan has entered into R&D agreements with Alfred University and
Nanoset, LLC, to develop nanomagnetic shield technology, and with the University
of Buffalo for carbon composite polymers (extremely fine carbon fibers in a
polymer, or plastic base material). These arrangements are discussed below in
more detail.

Biophan has entered into a development agreement with the UB Business
Alliance (at the University of Buffalo). The objective of the first phase of
this collaboration focused on developing the means to shield implanted medical
devices, such as a catheter, from the harmful effects of MRI. The second phase
of this collaboration is focusing on improving the shielding technology
developed in phase one by optimizing the formulation through the use of a
magnetic additive. The technology being developed by this collaboration consists
of small carbon materials manufactured in a flexible polymer support. Major
activities include development of optimally performing mixtures of carbon and
polymer materials and the application of these optimal formulations to medical
devices. Under the terms of the agreement for phase one of the collaboration, we
paid $23,375 toward the total project cost of $42,994. All aspects and
obligations of phase one have been completed and satisfied. Biophan will pay
$31,922 toward the total phase two project cost of $50,539 in four equal
installments of $7,980.50. The first three installments were paid August 15,
2003, October 24, 2003 and December 12, 2003, and a final payment is due within
30 days of the receipt of the final project report. Phase two of this
collaboration is expected to be completed in August of 2004.

Biophan has also entered into agreements with Alfred University. The
objective of this collaboration is to develop the means to shield implanted
medical devices, such as pacemaker leads, from the harmful effects of MRI and to
resolve image artifacts in medical devices such as guidewires, stents, pacing
leads and other medical devices. The technology being developed by this
collaboration consists of nano-magnetic materials and the processes used to
apply these materials as uniform, thin-film coatings. Major activities include
the development of optimal nano-magnetic coating formulations, delivery of
coated pacemaker leads, the delivery of coated guidewires and other devices
suitable for testing, processes for applying these formulations to medical
devices, and the testing of these devices in an MRI system. This collaboration
also provides Biophan with access to expensive, thin-film coating equipment
considered essential to the development of effective nano-magnetic MRI shielding
materials. Biophan has paid Alfred University $44,051 to date for these
services. We recently expanded our agreement with Nanoset, LLC and acquired
additional technology rights, which are described in the next section. The work
being done at Alfred has recently extended to demonstrating the use of
nanomagnetic materials in particulate form, as MRI contrast agents, potentially
improving the effectiveness of, and expanding the applications for, these
image-enhancing agents.

Biophan recently entered into an expanded Research and Development and
Licensing Agreement with Nanoset, LLC, the holder of the nanomagnetic particle
coating technology, and other technologies. Under our expanded agreement with
Nanoset, LLC, Biophan has exclusive rights to nanomagnetic particle technology
for any medical application; plus use of any other technologies developed by
Nanoset, LLC for improving MRI safety and/or MRI image compatibility. Biophan
also has exclusive rights to technologies for implanted power systems for
medical devices, including a patent owned by Nanoset, LLC for an implantable
fuel cell device which derives energy from various forms of fat found in tissue
and/or blood. The output of this device design is electrical power for powering
implantable devices, including pacemakers. Under the revised agreement with
Nanoset, LLC Biophan provides minimum royalty payments in advance of actual
royalties, and a minimum R&D agreement, funding research by Dr. Xingwu Wang, a
professor at Alfred University. Under the revised agreement, Biophan will pay
Nanoset, LLC for research services performed at Alfred University, and Nanoset,
LLC will, in turn, pay Alfred. Michael Weiner, CEO of Biophan, serves as a
director on the board of Nanoset, LLC, and is a co-founder. Nanoset, LLC
originally was formed to pursue technologies outside of the medical field. Dr.
Wang subsequently identified an opportunity to use his nanomagnetic particle
coatings to assist Biophan in its mission, which led to the relationship between
Nanoset, LLC and Biophan.

While the objectives of these collaborations are similar (i.e., the
development and evaluation of MRI shielding materials), it should be understood
that each collaboration is developing a different technology. The success of
these collaborations would provide Biophan with multiple solutions to the MRI
safety problem. Biophan considers this to be very important, since the MRI
shielding requirements differ by product type, and having multiple solutions
enables us to apply our technologies to a broader range of products. It also
reduces the potential for third parties to "work around" our technology.
Specific product technology development activities along with timelines and
estimated costs can be found in the section "Products and Markets" below in this
document.

PATENTS AND INTELLECTUAL PROPERTY

We have been aggressive in filing patent applications on these
technologies, and plan to continue to be aggressive in pursuit of patent
coverage for our innovations. Due to the importance of our patent portfolio, it
may be helpful to provide more detail regarding the patent process:

o Once a patent application is filed, the United States Patent &
Trademark Office (USPTO) examines it over a period that may range
from a year to two or more. USPTO Office Action is a review of the
content or scope of the patent, and may require one or more
iterative responses to the Examiner's questions or challenges.
During this process, typically after 18 months from filing, the
USPTO will publish the application, making it available on the USPTO
database so that it is publicly available. Once negotiation over the
Office Action is complete, the USPTO may allow the patent,
essentially informing the inventor(s) that they may pay fees and the
patent will then issue, or become a formal patent.

o As previously discussed, we have exclusive licenses, for medical
device applications, to five issued patents; one each in the areas
of carbon composite shielding and RF (radio frequency) filtering,
and three in the area of nanomagnetic shielding.

o In addition to the above issued patents, Biophan and its licensor,
Nanoset, have collectively filed 55 US patent applications covering
various aspects of photonic and other technologies providing
improvements in MRI safety and compatibility, as well as other
aspects of implantable device performance. Four of these have issued
as U.S. patents, and an additional six of these applications have
been allowed by the U.S. Patent and Trademark Office, and are
expected to issue within approximately six months.

o The inventor of the nanomagnetic shield technology, Dr. Xingwu Wang,
at Alfred University, New York, has been granted a third issued U.S.
patent, and has applied for an additional twelve, two of which have
been allowed. (US patent applications covering further improvements
and extensions to that technology; these will also be licensed
exclusively to Biophan for medical markets.)

o Biophan has recently secured additional technology rights expanding
its exclusive license for use of nanomagnetic particle and other
technology. The technology rights are granted under an expanded
license agreement executed on January 15, 2004 with Nanoset, LLC
that increases Biophan's rights to technology that may be applied to
medical devices and other uses. The expanded rights include the
exclusive right to any technology that affects magnetic resonance
imaging (MRI) safety or image compatibility or involves an
implantable power system.

o Additional patent filings in nanomagnetic materials, and in MRI
microcoil designs, are in process.

o Thus, the total number of patents and applications assigned to, or
licensed to, Biophan is 60; of these, nine have issued as U.S.
patents and an additional six have been allowed and will issue in
the near future.

The issued patents have remaining lifetimes, as follows:

o U.S. 6,725,092; Electromagnetic Radiation Immune Medical Assist
Device Adapter; 18 years
o U.S. 6,718,207; An Electromagnetic Interference Immune Tissue
Invasive System; 18 years
o U.S. 6.718,203; An Electromagnetic Interference Immune Tissue
Invasive System; 18 years
o U.S. 6,711,440; MRI-Compatible Medical Device with Passive
Generation of Optical Sensing Signals; 18 years
o U.S. 6,713,671; Magnetically Shielded Assembly; 18 years
o U.S. 6,506,972; Magnetically Shielded Conductor; 18 years
o U.S. 6,673,999; Magnetically Shielded Assembly; 18 years
o U.S. 5.827,997; Metal Filaments for Electromagnetic Interference
Shielding; 11 years
o U.S. 5,217,010; ECG Amplifier and Cardiac Pacemaker for Use During
Magnetic Resonance Imaging; 6 years
o New patent filings incorporate combinations of these inventions in
devices, to extend through the life of our patent coverage.

Lifetimes for any additional patent applications that are granted as
patents by the USPTO will be the greater of:

o 17 years from the date of issue; or
o 20 years from the date of filing.

The patent strategy being pursued by us is based on both broad coverage at
the system level and focused coverage at the component level. This strategy is
being applied to active medical devices such as cardiac assist devices
(pacemakers and defibrillators), intraluminal imaging coils, stents, patient
monitoring instrumentation, neurostimulators, drug pumps, endoscopes and to
passive medical devices such as biopsy needles, guidewires, and to other medical
devices that need to be made safe and effective in an MRI environment.

Michael L. Weiner, our President and CEO, has participated as inventor or
co-inventor in a number of the patent applications currently being pursued by
Biophan, each of which has been assigned to us. Throughout his employment, Mr.
Weiner has assigned and will continue to assign to us rights to patents that
deal with MRI safety, image compatibility and HIV antisense. Biophan does not
have proprietary rights in six unrelated patents, of which Mr. Weiner is the
inventor or co-inventor, in areas of technology outside of Biophan's business
interests. One of the six patents was the basis for an infringement suit against
LeapFrog Enterprises, which was recently settled. The terms of the settlement
agreement are confidential. This infringement suit was unrelated to the business
of Biophan as is the patent upon which it is based. Of the patents, for which
Mr. Weiner is an inventor of co-inventor, assigned to entities other than
Biophan, none will be directly or indirectly competitive with Biophan. All
material assignments of patent applications from Mr. Weiner to Biophan have been
filed as exhibits to the registration statement, of which this prospectus is a
part.

PRODUCTS AND MARKETS

We are addressing three basic areas of technology and product development
that apply across several market segments:

o MRI shielding for active medical devices;

o MRI shielding for passive medical devices, such as guidewires and
biopsy needles, enabling surgery be done under MRI guidance;

o Photonic and shielding solutions for MRI imaging; and

o MRI contrast agents.

We do not intend to produce by ourselves a product for sale, but rather to
make our technologies available to other companies or partners that would like
to include in their own product portfolio a new product(s) containing our
technology. We anticipate that any such product(s) would be developed through
collaboration with external companies or partners. Most likely, we would enter
into licensing and R&D agreements with these partners, which ultimately could be
potential sources of funding. Although we would consider lump-sum license
payments, if offered, we anticipate licensing income in advance of product sales
to tie up rights for each market segment, and then ongoing royalties once these
products are in the market. Potential revenue streams above any negotiated
minimum license payments would likely commence six to nine months following
approval by the FDA for product shipments.

Following are brief descriptions of the planned development activities,
each with a set of milestones with timeline and estimated Biophan cost net of
any revenues. In each case, we are assuming that a commercialization partner
will be identified and provide revenues, in the form of development payments, to
assist us in the further development of the particular technology. The milestone
projections comprehend receiving such development revenues, in each case, at the
milestone/activity stage denoted as "3. Complete a Detailed Product Design",
generally, during the first half of calendar year 2004.

MRI SHIELDING FOR ACTIVE MEDICAL DEVICES

We have licensed, developed, and patented technology in both carbon
composite shielding and nanomagnetic shielding. For certain devices, this
approach has the potential to provide a more cost-effective path to MRI safety
and compatibility than the photonic approach. Results of direct testing in an
MRI device to date have been quite promising, and further work is underway to
refine the designs of materials and coating methods. This MRI shielding
technology may be applied to active medical devices such as pacemakers and
related devices, drug pumps, and the like. We are currently having discussions,
under confidentiality agreements, with manufacturers of primary device
components such as pacemaker leads, as well as manufacturers of complete
systems, concerning their use of this technology. Ongoing research, test, and
evaluation activities in nanomagnetic shielding are being done internally, and
in conjunction with Dr. Wang (the inventor of the technology) at Alfred
University, and Dr. Chung at the University of Buffalo. The material terms of
these contracts are discussed under the heading "Research and Product
Development Activities." Recent activities in this area have combined shielding
technology with filtering technology acquired under license from Johns Hopkins.
The details of the agreement with John Hopkins are discussed under the heading
"Licenses." Progress has been delayed by the current lack of a commercialization
partner, requiring the target dates for some milestones to be extended.
Following recent announcements by Medtronic relating to plans to commercialize
MRI safe devices beginning in 2005 (not in partnership with Biophan) we have
renewed discussions with one or more implantable device manufacturers.

MILESTONES / ACTIVITIES - MRI SHIELDING FOR ACTIVE DEVICES:

-------------------------------------------------- -------------------------------- ------------------
MILESTONE/ACTIVITY TIME PERIOD REQUIRED FUNDING
(000s)
-------------------------------------------------- -------------------------------- ------------------
1. Demonstrate Technical Feasibility

a. Demonstrate the ability to minimize or Completed
eliminate device heating and electrical
problems caused by MRI
b. Demonstrate the ability to meet December 03 - June 04 $80
secondary product performance
requirements (e.g. biocompatibility,
flexibility, etc)
c. Demonstrate that the technology can be December 03 - June 04 $60
manufactured at acceptable costs and
quality
d. Continue to file related patent Completed applications
-------------------------------------------------- -------------------------------- ------------------
2. Identify a commercialization partner(s) Ongoing $ 33
-------------------------------------------------- -------------------------------- ------------------
3. Complete a Detailed Product Design December 03 - June 04 $180
a. Further optimize the technology's
performance and manufacturability
b. Develop detailed Product Design and
Manufacturing Process Specifications
-------------------------------------------------- -------------------------------- ------------------
4. Complete Design Verification May 04 - October 04 $210
a. Demonstrate that a product
manufactured to the Product Design
Specifications will satisfy the
Product Performance Requirements
b. Develop documentation required to
initiate clinical testing
-------------------------------------------------- -------------------------------- ------------------
Spending through October 2004 $563
-------------------------------------------------- -------------------------------- ------------------
5. Complete Design Validation November 04 - June 05 $150
a. Demonstrate that a product
manufactured to the Product Design
Specifications is clinically effective
and safe when used as intended
b. Develop documentation required for
regulatory body approval to
distribute and sell the product
-------------------------------------------------- -------------------------------- ------------------
Total Project Spending $ 713
========
-------------------------------------------------- -------------------------------- ------------------
Biophan intends to identify a
commercialization partner(s) to help
focus and financially support
activities (3), (4), and (5).
-------------------------------------------------- -------------------------------- ------------------

MRI SHIELDING FOR PASSIVE MEDICAL DEVICES

The same MRI shielding technology may be applied to a wide variety of
passive devices that are used in implantable medical devices and in surgery,
such as biopsy needles, guidewires, endoscopes, etc. We believe that our MRI
shielding will eliminate the problems of patient risks and image degradation for
passive devices and surgical implements which incorporate the technology. We are
currently having discussions with a variety of manufacturers of passive devices,
and are involving them in test procedures we are conducting. Ongoing research,
testing, and evaluation of this technology is also being done with Dr. Wang (the
inventor of the technology) at Alfred University, and Dr. Chung at the
University of Buffalo.

MILESTONES / ACTIVITIES - MRI SHIELDING FOR PASSIVE DEVICES

The table below summarizes current R&D activities being funded by Biophan
and partners. The recently completed financing, and the financing which will be
enabled by this registration, provides adequate working capital to execute these
targeted spending allocations, and to increase them, as may be needed.
Additionally, the company is now positioned to explore additional technology
acquisitions and to retain additional contract research. As with plans for
active devices, recent activities relating to passive devices have combined
shielding technology with filtering technology acquired under license from Johns
Hopkins. The details of the agreement with John Hopkins are discussed under the
heading "Licenses." Progress has been delayed by the current lack of a
commercialization partner, requiring the target dates for some milestones to be
extended. Following recent announcements by Medtronic relating to plans to
commercialize MRI safe devices beginning in 2005 (not in partnership with
Biophan) we have renewed discussions with one or more other implantable device
manufacturers.

a. Demonstrate the ability to minimize or Completed
eliminate device heating and electrical
problems caused by MRI
b. Demonstrate the ability to meet December 03 - June 04
secondary product performance $50
requirements (e.g. biocompatibility,
flexibility, etc) December 03 - June 04
c. Demonstrate that the technology can be
manufactured at acceptable costs and October 03 - February 04 $40
quality
d. Continue to file related patent
applications $40
-------------------------------------------------- -------------------------------- ------------------
2. Identify a commercialization partner(s) Ongoing $ 30
-------------------------------------------------- -------------------------------- ------------------
3. Complete a Detailed Product Design December 03 - May 04 $ 80
a. Further optimize the technology's
performance and manufacturability
b. Develop detailed Product Design and
Manufacturing Process Specifications
-------------------------------------------------- -------------------------------- ------------------
4. Complete Design Verification April 04 - August 04 $150
a. Demonstrate that a product
manufactured to the Product Design
Specifications will satisfy the
Product Performance Requirements
b. Develop documentation required to
initiate clinical testing
-------------------------------------------------- -------------------------------- ------------------
5. Complete Design Validation September 04 - October 04 $20
a. Demonstrate that a product Spending through October
manufactured to the Product Design 04 $410
Specifications is clinically effective
and safe when used as intended November 04 -
b. Develop documentation required for April 05 $100
regulatory body approval to distribute
and sell the product
-------------------------------------------------- -------------------------------- ------------------
Total Project Spending $510
========
-------------------------------------------------- -------------------------------- ------------------
Once again, Biophan intends to identify a
commercialization partner(s) to help
prioritize and financially support
activities (3), (4) and (5).
-------------------------------------------------- -------------------------------- ------------------

MRI CONTRAST AGENTS

MRI provides excellent soft tissue contrast, and various image analysis
techniques provide the ability to differentiate between fat, muscle, brain, and
other fundamentally different tissue types. Beyond that, however, contrast
agents are used to enhance the contrast between different tissue types,
permitting image analysis software to highlight specific features (e.g. vascular
structures). Typical materials used for traditional MRI contrast agents are
either iron oxides or gadolinium-based compounds; while there are other
materials in commercial use, their performance and breadth of use are
substantially lower. Iron-based and gadolinium-based compounds have shortcomings
in terms of signal strength and toxicity, respectively. They also are typically
used in a serial and highly time-dependent fashion. This means that typically
one target tissue type is image-enhanced per diagnostic procedure, and the
buildup and clearance of contrast agents is highly time dependent, requiring
careful orchestration of the diagnostic imaging procedure.

As part of our work with nanomagnetic particles, we have licensed
technology from Nanoset, LLC that is the subject of a recently filed patent
application relating to the use of these particles as contrast media for MRI. We
believe that our ability to manipulate the chemical makeup of these particles,
and our ability to use multiple imaging modes in detecting them, will permit us
to develop MRI contrast agents having substantial advantage over current
materials, including the ability to deliver a `cocktail' contrast agent that
permits MRI to detect multiple disease or tissue injury types during a single
MRI imaging sequence.

Active R&D work is contemplated by the Company, but specific plans have
not yet been formalized; in the meantime the patent application will be
prosecuted aggressively with our support.

MARKETS

The global market for medical devices that could benefit from technology
that will enable those devices to operate safely and effectively in an MRI
environment was approximately $5 billion in the year 2002 and is growing
annually by 15%. (See Wedbush Morgan Securities' Equity Research Report 13 Mar.
2002 on NYSE-GB.)

We anticipate that we will license our technology to one or more
development partners who would be responsible to develop commercial products,
obtain necessary approvals, manufacture, market and distribute the products. We
expect our search for development partners will be global, although our current
efforts are focused on the U.S. operations of certain multi-national companies.
However, we can not presently identify or predict the precise target markets,
distribution methods or other marketing efforts of our potential development
partners.

On September 25, 2003, we entered into a development agreement with Boston
Scientific Corp., a biomedical device company. The purpose of this agreement is
to establish a framework to explore the use of our technology to make one of
Boston Scientific's products MRI safe and image compatible. The agreement
contemplates three phases, to be completed over a period of seven months. The
first phase has been completed and we have recorded $75,000 of revenues that we
received for our services provided in the first phase. Boston Scientific has the
right to elect to proceed with second and third phases. The aggregate
development payments relating to the second and third phases if Boston
Scientific elects to proceed with them is $225,000. We are discussing with
Boston Scientific potential changes to the scope of the second and third phases
based on the results from the first phase. We are also discussing initiatives
with other divisions of Boston Scientific which are outside the scope of the
agreement. If Boston Scientific elects to proceed with additional phases under
the agreement and such phases are completed and successful, or if one or more of
our other initiatives being discussed with Boston Scientific proceeds, it may
lead to a license for one or more of our technologies in the context of one or
more product lines. We can make no assurances that we will be able to enter into
any such license agreement. As part of this agreement, we have offered Boston
Scientific a period of first right of negotiation for the application our
technology to their product, extending through May 15, 2004. Because of the
limited payments potentially due to us under the agreement with Boston
Scientific, the amount of our other resources and the commitment of SBI under
the stock purchase agreement, we are not substantially dependent on the Boston
Scientific agreement.

The market for devices that have imaging compatibility problems are in
addition to the market opportunity for safer devices. We estimate the market for
devices which had imaging limitations to be an additional $5 billion or greater.
These include implantable artificial hips, knees, bones, and other prosthetics;
stents, shunts, screws, wires, shanks, etc.

COMPETITION

There are a number of major companies engaged in the development of
medical devices, some of which may be investigating MRI safe options. However,
to the best of our knowledge, none of these companies, nor other companies that
serve as their suppliers, have successfully developed technology enabling
implantable medical devices to be operated in the presence of MRI equipment. We
believe that, in order to commercialize our technologies, we will have to enter
into a development or licensing agreement with one or more of the companies
engaged in the development of medical devices.

Currently, the major providers of active medical devices contraindicated
for MRI include the following companies:

Medtronic Incorporated is a leading manufacturer of cardiac rhythm
management, cardiovascular and other medical devices. The company has a
dominant position in cardiac pacemakers, is the leading manufacturer of
implantable cardiac defibrillators, and is a major player in most other
device markets in which it competes. In May, 2003 a patent application
filed by Medtronic was published on web site of the United States Patent
and Trademark Office. This patent teaches a proposed method of reducing
the induced voltage of a pacemaker lead. We do not know how effective the
Medtronic approach will prove to be. It appears to use more complex
electrical components than the Biophan solution. The entrance of Medtronic
into the market with an MRI safe pacemaker solution, if it should occur,
is viewed by us to be a very positive event that will propel the industry
forward, and may result in licenses for our technology to be sought by the
other pacemaker companies competing with Medtronic.

Guidant Corporation is also a leading manufacturer of cardiac rhythm
management devices such as cardiac pacemakers, implantable cardiac
defibrillators, interventional cardiology devices (including coronary
stents), and other cardiac and vascular surgery devices and instruments.

St. Jude Medical, Inc. is a global developer, manufacturer, and
distributor of medical device products for cardiac rhythm management,
cardiology and vascular access. Other products include mechanical and
tissue heart valves and vascular closure devices.

Boston Scientific Corporation is the world's largest medical device
company dedicated to less-invasive therapies. The Company's products and
technologies are designed to improve surgical procedures and improve
patient response, and involve a range of interventional tools and
procedures. Biophan has announced a joint development agreement with
Boston Scientific to explore the use of our technology to make one of
their products MRI safe and image compatible.

Johnson & Johnson is the world's largest healthcare company. In addition
to OTC and home healthcare products, they provide a wide variety of
pharmaceutical, diagnostic, and surgical products.

Biotronik is a leading European biomedical technology company; their 2500
people develop and market products focused on cardiac electrotherapy and
vascular intervention.

ELA Medical is an innovative leader in research, development,
manufacturing and marketing of cardiac rhythm management implantable and
diagnostic systems.

The COOK family of companies includes medical device manufacturing
companies that produce products for interventional radiology,
interventional cardiology, urology, neuroradiology, vascular medicine,
critical care, and many other disciplines.

Baxter International is a global health care company providing critical
therapies for people with life-threatening conditions, including cancer,
hemophilia, immune deficiencies, infectious diseases, kidney disease and
trauma. Baxter is a global leader in developing innovative medical
therapies that improve the quality of life for people around the world.
Arrow International is a leading supplier of disposable critical care
catheterization products used to access the central vascular system for
administration of fluids, drugs and blood products, and for patient
monitoring anddiagnosis.

Philips, Siemens, General Electric and Toshiba, are major manufacturers of
MRI imaging devices, are believed to have research and development
initiatives underway, involving MRI safety and image compatibility.

C. R. Bard, Inc. is a leading multinational developer, manufacturer, and
marketer of innovative, life-enhancing medical technologies in the fields
of Vascular, Urology, Oncology, and Surgical Specialty products.

Each of these companies has the potential to be a direct competitor,
and/or a licensee. Each may have or develop future interest in adopting one or
more of our technologies into their products. Additionally, these companies may
wish to enter into licensing agreements with us in the event that one or more of
their prospective solutions under development would infringe our issued patents,
or those of our pending patents when they issue.

Various first and second tier suppliers to these companies may be directly
affected by technologies we are developing, and since to the best of our
knowledge, none of them has satisfactory solutions to MRI issues, they are
potential additional or alternative prospects for commercializing our technology
as well as potential competitors.

MANUFACTURING AND COMPONENT STRATEGY

We are developing technology for MRI safety and image compatibility which
will be licensed to leading biomedical device manufacturers. We may provide
critical components and coating devices sourced from third parties and resold to
our customers.

REGULATORY APPROVAL

We believe that our technology will be incorporated into various medical
devices by major manufacturers and that these manufacturers will be responsible
for obtaining Food and Drug Administration (FDA) and other regulatory approvals
required for clinical studies and marketing of their products. The time and cost
of these activities can be substantial, especially for Class III implantable
products, and could delay the introduction to the marketplace of products
utilizing our technology.

Currently, the FDA, specifically The Center for Drug Evaluation and
Research (CDER), is responsible for the approval to market products resulting
from the technology currently being developed by Biophan. Approval to market may
take the form of a New Drug Application (NDA). An NDA is sought by a company
prior to the commencement of clinical testing in humans. Before approving an
NDA, the FDA will seek substantial documentation demonstrating that the product
candidate technology is safe and effective. Once the NDA has been approved,
clinical trials are conducted in three sequential phases which may overlap.
Phase I clinical trials are performed in healthy human subjects to establish
initial data about the safety and efficacy of the product. In Phase II clinical
trials, in addition to accumulating safety and efficacy data, the product is
evaluated in a limited number of patients with the targeted disease condition.
Phase III clinical trials typically involve continued testing for safety and
efficacy, as well as other criteria, in expanded, large-scale, multi-center
studies of patients with the targeted disease condition.

We do not intend to produce by ourselves a product for sale, rather we
intend to make our technologies available to other companies or partners that
would like to include the technology in their own product. We believe that these
companies will be willing to share a portion of the costs required to obtain FDA
approval. In certain instances, the FDA may require a partner's participation if
approval is being sought for modification of a partner's existing product to
include our technology, a product that uses the partner's existing manufacturing
processes, or a situation where a partner requires that Biophan use the
partner's quality system.

We believe that the timeframe for FDA approval of our photonic technology
for intra-luminal MR imaging, enabling us to make, use, and sell the product,
will depend upon the following factors:

o the FDA's classification of the photonic intra-luminal MR imaging
catheter;

o the specific ways in which a partner plans to use the product, such
as the specific parts of the body they would like to image with the
product (e.g., cardiovascular system, brain, etc.); and

o the level of urgency placed on the activities required to obtain
product regulatory approval.

The FDA has already approved for sale intra-luminal imaging catheters that
utilize electrical leads to provide power to the microcoil and to carry received
signals back to the MRI system. We have had discussions with several companies
that have such a product, and we believe that our photonic technology would
permit improvements in performance, due to its inherent immunity to
electromagnetic noise created by the MRI environment. Discussions with these
companies have not yet moved toward a development program, but if we to develop
a photonic intraluminal imaging catheter with one of them, we would expect it to
be responsible for regulatory approval and for marketing and sale of the
product. We do not plan to compete directly in this market--our plan is to
provide technology that improves the market position of another company already
in the marketplace and not to develop a stand-alone product. In the event that
this program moves forward, our plans provide for a contribution of $500,000
toward regulatory approval efforts costing approximately $1,500,000. However,
the partner company will be responsible for oversight and conduct of clinical
trials, and for applying to the FDA for approval.

Because sufficient information exists from already-approved products to
assure the safety and efficacy of these devices in the applications we envision,
we anticipate, but cannot guarantee, that the FDA will require a Pre-Market
Notification or 510(k) approval. This would be in place of a Pre-Market
Approval, a more involved process usually reserved for devices that sustain
human life and for which there is insufficient information to assure patient
safety. A 510(k) approval will require that we demonstrate to the FDA data that
the product design and intended uses of the product are substantially equivalent
to a product(s) already approved by the FDA for commercial distribution in the
U.S.

In the event the FDA considers the Biophan product to be a Class II
Medical Device subject to 510(k) approval, we would work with a partner to
collect or develop the product performance data the FDA requires to prove that
the our product is substantially equivalent to intra-luminal catheters already
on the market. We anticipate that collecting or developing this data would be at
least a moderately high priority by a partner, and would take approximately
three to six months to complete. Biophan and its partner would include this data
in an application to the FDA for 510(k) approval, 90 days before selling the
device. The FDA can refuse to allow this approval to be granted by responding
with questions during the 90 day review period. Based upon this possibility, we
estimate that the approval process will require a total of 180 days.
Accordingly, the total time for product regulatory approval would be
approximately 12 months.

The FDA has also previously approved for sale the types of active devices
(pacemaker leads) and passive devices (guidewires and catheters) that we would
like to improve by the addition of our MRI (MRI) shielding technologies. We
believe that the technology would improve the performance of these existing
products during MRI examinations. The FDA considers these devices to be Class II
Medical Devices, and historically they have been subject to Pre-Market
Notification or 510(k) approval requirements.

We anticipate working with a partner to collect or develop the product
performance data required for FDA approval of our shielding technologies. This
data will include proof of the following:

o that the product modified to include Biophan's shielding technology
is still substantially equivalent to products already approved for
sale by the FDA; and

o that the addition of Biophan's shielding technology actually does
improve the performance of the existing product during MRI
examinations.

We have entered into a development agreement with Boston Scientific, and we are
also developing relationships with other potential partners; however, we have
not yet entered into any definitive agreements regarding FDA approval.

The addition of Biophan's shielding technology to an existing product
requires that we apply a proprietary coating to the product. Because the coating
process does not require any significant changes to the product design or to its
manufacturing process and therefore little risk to the safety of its operation,
we anticipate that a minimal amount of data will be required. We feel that it is
reasonable to expect that the FDA will consider the 510(k) approval process they
required to approve the original device as sufficient to approve the minor
modifications to a partner's device required to integrate Biophan's technology.
We anticipate that collecting or developing this data would be at least a
moderately high priority by a partner, and would take approximately three to six
months to complete. Biophan and its partner would include this data in an
application to the FDA for 510(k) approval, 90 days before selling the device,
as is required by the 510(k) approval process. The FDA can refuse to grant
510(k) approval by responding with questions during the stipulated 90 day review
period. Based upon this possibility, we conservatively estimate that the
approval process will require a total of 180 days. Accordingly, the total time
for product regulatory approval for planning purposes is 12 months for both
active and passive devices.

During the 510(k) approval process, it will be necessary to collect
biocompatibility and toxicity data, to establish that the modified product is
safe. The FDA provides specific guidelines for evaluating the biocompatibility
and toxicity risk associated with medical devices in their document entitled
"Guidance for the Submission of Research and Marketing Applications for
Permanent Pacemaker Leads and for Pacemaker Lead Adapter 510(k) Submissions,"
issued on 1 November 2000. This guidance document clearly states (Attachment C -
"Biocompatibility Flow Chart for the Selection of Toxicity Tests for 510(k)s")
that device materials that do not contain toxic substances (as is the case with
Biophan's shielding material) satisfy biocompatibility requirements. Biophan can
collect this toxicity data from available toxicology literature without the need
for human studies. We believe that the FDA will support this procedure and not
require human studies to demonstrate biocompatibility and the absence of any
toxicity risk. However, if this proves not to be the case, then we expect the
FDA would follow the guidelines it recommends for determining the
biocompatibility and toxicity of unknown substances. These are also outlined in
their guidance document entitled "Guidance for the Submission of Research and
Marketing Applications for Permanent Pacemaker Leads and for Pacemaker Lead
Adapter 510(k) Submissions," issued on 1 November 2000. These guidelines
stipulate the use of in vitro (out of the body) extraction methods. This testing
is relatively minor in nature, and has already been included in the proposed
regulatory approval timeline and budget requirements.

Demonstrating that Biophan's shielding technologies improve the products
performance during MRI examinations will require evaluating the performance of
the product in an MRI coil. Given the perceived low level of patient risk
associated with our shielding technologies, we anticipate that these data can be
obtained through testing that also does not involve human subjects and only a
limited number of animals.

We anticipate that the collection and development of these data will
require $450,000 for each of the limited number of active device applications
and passive device applications initially envisioned, and $1,500,000 for the
intra-luminal imaging catheter. We also anticipate that a partner or licensee
would fund at least 67% of these expenses. During the year ended February 29,
2004, we expended approximately $650,000 on the active and passive device
applications. These expenses were funded from the proceeds of equity financing
from the Spectrum and previous SBI agreements. We will not pursue FDA or other
regulatory approvals of our technology; rather it is intended that our partners
or licensees would pursue the required approvals.

The approach to regulatory approval for nanomagnetic MRI contrast agents
will follow a similar path to that intended for the above product opportunities;
it is expected that the eventual manufacturing/marketing partner will both
direct, and bear the costs of, clinical studies and regulatory approval for
contrast agent products. Cost estimates and timelines for these activities have
not as yet been developed.

LICENSES

We have entered into licenses for issued, allowed and pending patents.
These licenses require annual minimum royalties up to $10,000 each, some of
which escalate in future years, and provide for ongoing royalties of 4-5% of
product sales. Each license is for the life of the patent(s) and each is
exclusive for the medical market or segments thereof, and permit sub-licensing:

o A license from Johns Hopkins University for an issued patent for an
MRI-safe electrocardiogram and pacemaker lead. This agreement
provides for an initial licensing fee of $10,000 and a running
royalty of 4% on product sales. This agreement remains in effect for
the life of the patents underlying the license. The license may be
terminated earlier, at Biophan's election, upon 60 days' written
notice to Johns Hopkins. Johns Hopkins may only terminate the
agreement early if there is a breach by Biophan which is not cured
within 30 days following written notice of such breach or default.

Alicense agreement for additional shielding technologies from
Nanoset, LLC. This license agreement provides for an initial
licensing fee of $10,000 and a running royalty of 5% of product
sales. The license agreement currently covers 17 patents and/or
patent applications. This agreement remains in effect for the life
of the patents underlying the license. The license may be terminated
earlier, at Biophan's election, upon 60 days' written notice to
Nanoset. Nanoset may only terminate the agreement early if there is
a breach by Biophan which is not cured within 60 days following
notice of such breach or default. This license agreement was
recently expanded to include any inventions relating to MRI safety
and MRI image compatibility, including electrical circuits and
filtering combined with nanotechnology coatings.

o A license from Deborah D. L. Chung for an issued patent entitled
Metal Filament for Electromagnetic Shielding. This agreement
provides for an initial licensing fee of $10,000 and a running
royalty of 5% of product sales. This agreement remains in effect for
the life of the patents underlying the license. The license may be
terminated earlier, at Biophan's election, upon 60 days' written
notice to Chung. Chung may only terminate the agreement early if
there is a breach by Biophan which is not cured within 60 days
following notice of such breach or default.

COMPANY HISTORY

We incorporated in the State of Idaho on August 1, 1968 under the name
Idaho Copper and Gold, Inc. On February 9, 1999, we amended our Articles of
Incorporation to change our name from Idaho Copper and Gold, Inc. to Idaho
Technical, Inc. On January 12, 2000 we formed a corporation in Nevada with the
intent to move our domicile to Nevada. On January 24, 2000, we implemented the
change of domicile to Nevada by filing Articles of Merger between the Idaho and
Nevada Corporations. On December 1, 2000, we amended our Articles of
Incorporation to change our name from Idaho Technical, Inc. to GreatBio
Technologies, Inc. and on July 19, 2001, we amended our Articles of
Incorporation to change our name from GreatBio Technologies, Inc. to Biophan
Technologies, Inc.

On December 1, 2000, we acquired LTR Antisense Technology, Inc., a New
York corporation, from Biomed Solutions, LLC (formerly Biophan, LLC), a New York
limited liability company, in a share for share exchange. As a result of the
exchange, LTR became a wholly owned subsidiary. The exchange was consummated
pursuant to and in accordance with an Exchange Agreement, dated December 1, 2000
and amended as of June 8, 2001, by and among our company, LTR and Biomed. LTR
owns several patents for proprietary HIV antisense gene therapy technology.

In connection with the exchange, we:

o issued 10,759,101 shares of common stock to Biomed in exchange for
all the issued shares of LTR; and

o issued an additional 10,759,101 shares of common stock to a group of
investors, consisting of Ed Cowle, H. Deworth Williams and Geoff
Williams, for cash of $175,000 in order to provide initial working
capital.

Also on December 1, 2000, we acquired intellectual property rights,
including a pending patent to the MRI-compatible pacemaker technology from
Biomed, for future consideration of $500,000. The assignment was consummated
pursuant to, and in accordance with, a transfer agreement and a related
assignment and security agreement, dated December 1, 2000 and subsequently
amended, by and between us and Biomed.

The assignment and the security agreement (i) assigned the rights to the
transferred MRI patents and subsequent improvements, and (ii) provided the same
as collateral for the payment of the $500,000 liability under the transfer
agreement. Both the exchange agreement and the assignment and security agreement
contain provisions for the reversion of the technology to Biomed if:

o we become bankrupt or otherwise seek protection from creditors; or

o in the case of the MRI-compatible technology, we fail to pay the
consideration therefor when due.

As described elsewhere in this annual report, all of our obligations under
the transfer agreement have been converted into shares of our common stock and
the security agreement has been terminated.

During 2001, we entered into a Commercial Research and Development
Agreement (CRADA) with the National Institutes of Health and the University of
Rochester Cancer Center, wherein these organizations conduct research and
development associated with the antisense technology. This allowed us to put our
full resources into the development of the MRI safety improvements to biomedical
products. In 2002, we decided to discontinue research and development of the HIV
antisense technology, and the CRADA was terminated. While the technology holds
promise and has issued patents, we feel our most promising opportunity is in the
MRI safe solutions we have developed, and we intend to focus our research and
development activities on that technology. We may sell the HIV antisense patents
if an appropriate buyer can be identified.

EMPLOYEES

As of February 29, 2004, we had eleven full-time employees.

ITEM 2. DESCRIPTION OF PROPERTY

Our headquarters are located at 150 Lucius Gordon Drive, Suite 215, West
Henrietta, NY 14586, in 4,000 square feet of office space leased from an
unrelated party. Current rentals are $4,846 per month and the lease expires in
September 2004. The coordination of our research and development projects and
the administration of our two wholly owned subsidiary companies, currently
inactive, are directed from this location.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material legal proceedings and there are no
material legal proceedings pending with respect to our property. We are not
aware of any legal proceedings contemplated by any governmental authorities
involving either us or our property. None of our directors, officers or
affiliates is an adverse party in any legal proceedings involving us or our
subsidiaries, or has an interest in any proceeding which is adverse to us or our
subsidiaries.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock is listed on the OTC Bulletin Board under the symbol
BIPH. The following table sets forth, for the fiscal quarters indicated, the
high and low bid prices. These quotations reflect inter-dealer prices, without
mark-up, mark-down or commission, and may not represent actual transactions.

Quarter Ended High Low
May 31, 2002 $2.65 $ .75
August 31, 2002 $1.13 $ .30
November 30, 2002 $ .38 $ .18
February 28, 2003 $1.15 $ .29
May 31, 2003 $ .51 $ .27
August 31, 2003 $ .37 $ .12
November 30, 2003 $ .49 $ .10
February 29, 2004 $1.65 $ .32

As of February 29, 2004, we had outstanding 65,945,011 shares of our
common stock which were held by approximately 360 stockholders of record.

DIVIDEND POLICY

We have never paid cash dividends and have no plans to do so in the
foreseeable future. Our future dividend policy will be determined by our Board
of Directors and will depend upon a number of factors, including our financial
condition and performance, our cash needs and expansion plans, income tax
consequences, and the restrictions that applicable laws and our credit
arrangements then impose.

Recent Sales of Unregistered Securities

The securities of Biophan that were issued or sold by Biophan during the
year ended February 29, 2004 and were not registered with the SEC are described
below:

On June 30, 2003, we issued 1,268,621 shares of common stock for the
conversion of $183,950 of the $350,000 Line of Credit obligation payable to
Biomed Solutions, LLC. Biomed had previously sold that portion of its receivable
to a single purchaser, Bellador Advisory Services (Labuan) Ltd., a Kuala Lumpur,
Malaysia company. The shares were issued to Bellador and its assigns pursuant to
the exemption provided by Section 3(a)(9) of the Securities Act of 1933,
involving an exchange of securities with an existing securityholder where no
commission is payable. The debt was assigned by Biomed to Bellador pursuant to
the provisions of Regulation S of the Securities Act. All recipients of the
shares were nonaffiliated, non U.S. persons deemed to be accredited investors
and/or persons with knowledge of business. There was no general solicitation or
general advertising related to the transaction, and the recipients were required
to represent that they were non U.S. persons and that they were not acquiring
the shares for the account or benefit of any U.S. Person. The offer to purchase
the shares was not made to a person in the United States and, at the time of the
transaction, the purchasers were outside the United States. All securities
representing the shares were issued with appropriate restrictive legends.

On July 28, 2003, we issued 775,000 shares of common stock for the
conversion of a debt obligation payable to a single investor in the aggregate
amount of $155,568 ($143,570 principal, plus $11,998 interest). The shares were
issued to the investor pursuant to the exemptions provided by Sections 3(a)(9)
and 4(2) of the Securities Act, involving a private transaction in exchange for
debt. The shares were exchanged by Biophan with a single existing security
holder who is a non-affiliated accredited investor. No commission or other
remuneration was paid or given directly or indirectly for soliciting the
exchange. All securities representing the shares were issued with appropriate
restrictive legends.

Between July 12, 2003 and November 17, 2003 we issued an aggregate of
3,325,757 shares of our common stock to Spectrum Advisors, Ltd. in connection
with the restated stock purchase agreement dated as of November 22, 2002 between
us and Spectrum. We received aggregate proceeds of $491,190 from our sale of
these shares to Spectrum. In connection with such sales, we are obligated to
issue to Carolina Financial Services, LLC warrants to purchase 166,288 of our
common stock at an average exercise price of approximately $.16. These
transactions were exempt from registration under Section 4(2) of the Securities
Act because they did not involve any public offering.

On October 1, 2003 we entered into a stock purchase agreement with SBI
Brightline Consulting, LLC pursuant to which SBI agreed to purchase up to
11,000,000 shares of our common stock at fixed prices ranging from $.15 to $.40
per share. This transaction was treated as completed at the time of the signing
of the stock purchase agreement and was exempt from registration under Section
4(2) of the Securities Act because it did not involve any public offering. We
sold the shares pursuant to the stock purchase agreement between December 3,
2003 and January 12, 2004 for aggregate proceeds of $2.9 million. We have been
advised by SBI that it has sold all of such shares pursuant to our Registration
Statement on Form SB-2 (No. 333-109592) which was declared effective by the
Securities and Exchange Commission on November 17, 2003.

On January 21, 2004 and February 10, 2004, respectively, we issued 932,000
and 500,000 shares of common stock for the conversion of $93,200 and $50,000 of
line of credit obligation payable to Biomed Solutions, LLC. Biomed had
previously sold those portions of its receivable to a single purchaser, Bellador
Advisory Services (Labuan) Ltd., a Kuala Lumpur, Malaysia company. The shares
were issued to Bellador and its assigns pursuant to the exemption provided by
Section 3(a)(9) of the Securities Act of 1933, involving an exchange of
securities with an existing securityholder where no commission is payable. The
debt was assigned by Biomed to Bellador pursuant to the provisions of Regulation
S of the Securities Act. All recipients of the shares were nonaffiliated, non
U.S. persons deemed to be accredited investors and/or persons with knowledge of
business. There was no general solicitation or general advertising related to
the transaction, and the recipients were required to represent that they were
non U.S. persons and that they were not acquiring the shares for the account or
benefit of any U.S. Person. The offer to purchase the shares was not made to a
person in the United States and, at the time of the transaction, the purchasers
were outside the United States. All securities representing the shares were
issued with appropriate restrictive legends.

On February 5, 2004 we entered into a stock purchase agreement with SBI
Brightline Consulting, LLC pursuant to which SBI agreed to purchase up to
17,750,000 shares of our common stock at fixed prices ranging from $.60 to $2.00
per share. This transaction was treated as completed at the time of the signing
of the stock purchase agreement and was exempt from registration under Section
4(2) of the Securities Act because it did not involve any public offering. Of
the shares covered by this registration statement, 6,000,000 shares are shares
that may be issued by us to SBI pursuant to this stock purchase agreement.

On February 10, 2004, we issued 3,000,000 shares of common stock upon the
conversion of $300,000 of the obligations under our obligation payable to Biomed
Solutions, LLC under a transfer agreement. Biomed had previously sold that
portion of its rights to SBI Brightline Consulting, LLC. The shares were issued
to SBI pursuant to the exemption provided by Section 3(a)(9) of the Securities
Act of 1933, involving an exchange of securities with an existing securityholder
where no commission is payable. The debt was assigned by Biomed to SBI in a
transaction that was exempt from registration under Section 4(2) of the
Securities Act because it did not involve any public offering. The resale of
these 3,000,000 shares is being registered pursuant to this registration
statement.

On February 10, 2004, we issued 3,513,000 shares of common stock upon the
conversion of our outstanding debt obligations payable to Biomed ($200,000 under
a transfer agreement and $151,300 under a line of credit). The shares were
issued to Biomed pursuant to the exemption provided by Section 3(a)(9) of the
Securities Act of 1933, involving an exchange of securities with an existing
security holder where no commission is payable. The resale of these 3,513,000
shares is being registered pursuant to this registration statement.

Between January 15,2004 and February 29,2004, we issued 995,940 shares of
our common stock upon the exercise of outstanding warrants for aggregate gross
proceeds of $332,844. The shares were issued pursuant to the exemption provided
by Section 3(a)(9) of the Securities Act of 1933, involving an exchange of
securities with an existing security holder where no commission is payable.

ITEM 6. PLAN OF OPERATION

We are currently in the development stage of operations and expect to be
in that mode for at least the next twelve months. Our primary mission is to
develop and commercially exploit technologies for enabling cardiac pacemakers
and other implantable medical devices and surgical devices to be safe and
compatible with MRI. We believe that we have successfully demonstrated an
effective solution for making pacemakers safe for use with MRI and providing a
meaningful margin of safety. Our solution addresses both the problems of device
heating and induced voltages in pacemakers, the two primary problems associated
with the use of MRI for patients with pacemakers. Today, approximately 3 million
pacemaker recipients are denied access to MRI when needed, due to safety
concerns and FDA contraindications. If manufacturers of pacemakers incorporated
our solution into their products, we believe they would be safe for use with
MRI. We are in ongoing discussions with the major pacemaker manufacturers, and
one or more of these companies is currently evaluating our technologies and
patents. We are also negotiating with a major research university to undertake a
study to demonstrate further the dangers posed to pacemaker patients by MRI
imaging and the effectiveness of our solution. We believe that pacemaker
manufacturers, once provided with further evidence of the dangers associated
with their products in the context of MRI and the effectiveness of our
technology, will wish to incorporate our technology into their products to avoid
potential liabilities from the sale of devices that could have been made safer.

On October 1, 2003, we entered into a stock purchase agreement with SBI
Brightline Consulting, LLC that obligated SBI to purchase, upon our election, up
to 11,000,000 shares of our common stock for an aggregate purchase price of $2.9
million. The agreement required that the shares be registered with the SEC and a
registration statement for that purpose became effective on November 19, 2003.
All 11,000,000 shares have now been purchased by SBI for gross proceeds of $2.9
million, providing us with a positive net worth and cash on hand and investments
of $2.0 million as of February 29, 2004. We used the balance of these proceeds
to fund a portion of our operating and research and development expenses during
the year ended February 29, 2004.

In addition to the stock purchase agreement with SBI, we had been a party
to a restated stock purchase agreement with Spectrum Advisors Ltd. that became
effective on November 22, 2002. Under the Spectrum agreement we sold Spectrum a
total of 3,325,757 shares for aggregate consideration of $491,190. We used these
proceeds to fund a portion of our operating and research and development
expenses during 2003. We and Spectrum mutually agreed to terminate the Spectrum
agreement on February 9,2004.

During the fiscal year ended February 29, 2004, we borrowed an additional
$250,950 and repaid $72,500 under the Line of Credit agreement with Biomed. We
used the net borrowings of $178,450 to fund a portion of our operating and
research and development expenses until we started receiving proceeds from the
sale of shares to SBI as described above.

On February 5, 2004, we entered into a second stock purchase agreement
with SBI that obligates SBI to purchase, upon our election, up to 17,750,000
shares of our common stock for an aggregate purchase price of $25.0 million. SBI
is not obligated to purchase shares pursuant to this stock purchase agreement
unless the resale of the shares by SBI is registered under the Securities Act.
Only 6,000,000 shares covered by the second stock purchase agreement have been
registered for resale by SBI. As a result, SBI will not be obligated to purchase
the remaining shares covered by the stock purchase agreement unless and until we
have registered the resale of such shares by SBI. In addition, we do not
currently have sufficient authorized and unissued shares to issue such remaining
shares to SBI. We intend to seek approval at our next annual meeting of
stockholders to amend our articles of incorporation to increase our number of
authorized shares. If such amendment is approved, we will then decide whether or
not to register additional shares for resale by SBI so that we will have the
right to sell such additional shares to SBI under the stock purchase agreement.
No shares have yet been sold to SBI under the second stock purchase agreement.

We are currently exploring the possibility of listing our common stock on
a national securities exchange. Depending on the number of shares of stock that
we sell to SBI under the stock purchase agreement, the capital provided by such
sales may enable us to satisfy the capital requirements for such a listing.

During January and February 2004, obligations of $294,500 under our line
of credit and our obligation of $500,000 payable under the transfer agreement,
both owed to Biomed Solutions, LLC and its assignees, were converted according
to their terms into 7,945,000 shares of our common stock, thereby eliminating
these liabilities and increasing our stockholders' equity.

We estimate that the proceeds from the sale of our common stock pursuant
to the previous SBI stock purchase agreement and Spectrum agreement, coupled
with the additional equity financing available under the new SBI stock purchase
agreement, will be more than sufficient to satisfy our projected cash
requirements over the next 12 months. Our estimate of these cash requirements is
as follows:

Research and product development $ 973,000
Operating expenses, including
administrative salaries and benefits,
office expenses, rent expense, legal
and accounting, publicity, investor
relations 1,137,000
---------
Total Cash Requirements $2,110,000
=========

In December 2003, we announced three major strategic initiatives for 2004:
(1) Acquisition of Intellectual Assets, (2) Market Expansion, and (3) Strategic
Partnerships.

(1) We have five United States patents under license and 60 patents
pending or issued. The U.S. Patent and Trademark Office (PTO)
recently allowed an additional two patents for nanomagnetic particle
coatings, licensed exclusively to us for medical applications. Four
patents developed by us covering photonic applications for moving
biosensor information from inside the body and for other
applications have issued, and an additional four have also been
allowed and will issue within the next several months. We are
aggressively pursuing internal research and development projects, as
well as sourcing leading-edge providers of related technologies.
Intellectual property, such as technology solutions and patents, may
be developed internally, through joint ventures, or purchased. To
ensure the continuing value of our intellectual assets, we will
aggressively defend our patents and licensed technology, both
domestically and abroad.

(2) We currently enjoy a leadership position in developing technologies
designed to make implanted medical devices, such as heart
pacemakers, safe for use with MRI and other diagnostic imaging
tools. We have also developed technologies that allow for the use of
interventional MRI, without the heating problems that can cause
tissue damage or imaging problems that obscure the outcome of the
procedures. Based on discussions underway with several biomedical
device manufacturers, both in the U.S. and overseas, we plan to
expand the use of the technologies we have developed to make a wider
range of devices compatible with MRI. These technologies reduce
radio frequency interference, heating, and induced voltages. Since
the beginning of 2004 we have expanded our development and
partnering activities related to these technologies to include
guidewires, stents, drug pumps, biopsy needles and other prosthetic
and surgical tool devices, where the lack of MRI compatibility
negatively impacts investigational and diagnostic procedures.
Discussions with these device manufacturers indicate a need for, and
interest in, solutions to additional problems where we can develop
solutions based on our technology. We have used both surrogate
devices (such as copper rings) and actual manufactured implantable
products, in a gel phantom, to demonstrate our ability to accurately
image devices and their interior spaces in a manner that could not
be done previously. Part of our strategic initiative for 2004 will
include expanding our technology offerings to the companies with
whom we are already in discussions or collaborating.

Our Photonic MRI Microcoil (PMM) is one example of our expanded
technology. Recent studies indicate up to 85% of heart attacks and
strokes may be caused by vulnerable plaque which may result in
thrombosis, and is not easily detected by other methods. Our
technologies are designed to pinpoint specific sites where therapies
can address the problem. By inserting the PMM directly into a blood
vessel, MRI can provide a detailed look at vulnerable plaque without
injury-causing heating or image degradation. There are other uses of
our photonic catheter for diagnostics and therapeutic applications.
We were recently notified that the United States Patent and
Trademark Office (US PTO) has issued four U.S. patents, and allowed
an additional four of our pending patent applications for issuance,
and we have paid the fees to allow these patents to file.

Another example of our expanding on the use of our nanomagnetic
particle coating technology is NanoView. The concept of our NanoView
technology is to utilize nanomagnetic particles, a specific type of
nanotechnology, as contrast agents to preferentially bind to tissues
of diagnostic interest with the goal of improving detail and
contrast in MRI diagnostic image processes. We expect NanoView to
improve performance in terms of signal intensity and the use of
multiple markers, which broadens the applications of MRI imaging. We
have begun discussions with several manufacturers of contrast agents
and others in the diagnostic materials sector.

(3) Leveraging strategic partnerships is vital to our mission. In
November, 2003 we announced that we had entered into a joint
development agreement with Boston Scientific, a major medical device
manufacturer. We have successfully completed the first phase of a
multi-phase development plan with Boston Scientific, and we are
discussing the next phase of this program. Relationships such as
this one help us validate our technology and also develop potential
sales channels. We have entered into Non-Disclosure Agreements with
a number of major manufacturers of implanted biomedical and related
devices. We are discussing with these companies potential strategic
partnership arrangements that may include joint development
projects, original equipment manufacturing arrangements and
licensing agreements.

We estimate that our ongoing research and development plan will require
approximately $973,000 of our funds over the next 12 months, dedicated to the
following activities:

MRI Shielding for Active Medical Devices $ 563,000
MRI Shielding for Passive Medical Devices 410,000
--------
Total $ 973,000
=========

These amounts may increase as customer contracts identify specific tasks
and testing that may be required.

The MRI Shielding project entails the development of technology that may
be applied to active medical devices and passive medical devices to allow
patients to undergo MRI diagnostics. Active medical devices include such items
as pacemakers and drug pumps, and passive medical devices include such items as
biopsy needles, stents and guidewires.

In November 2003, we recorded $75,000 as a development payment from Boston
Scientific for prototype development of a prospective product adaptation. The
development activities related to this payment have been completed. We are in
discussions concerning additional phases of this initiative that, if completed
and successful, may lead to a license for one or more of our technologies in the
context of one or more product lines.

Our current strategic plan does not indicate a need for material capital
expenditures in the conduct of research and development activities, nor does the
plan contemplate any significant change in the number of employees. We currently
employ eleven full-time individuals.

Our plans do not include funding for FDA approvals, as our strategy is to
supply solutions to the major biomedical device manufacturers, who will
incorporate our technology into their existing and future product lines. It will
be the responsibility of these manufacturers to apply for and receive FDA
approval of their products. Since our technologies are made of known
biocompatible, non-toxic materials, and since we do not change the method by
which the devices conduct diagnostic and/or therapeutic functionality, we
anticipate reasonable timeframes for our customers to obtain FDA approvals of
devices that add our capability for safety and/or image enhancements.

ITEM 7. FINANCIAL STATEMENTS

FINANCIAL STATEMENTS

BIOPHAN TECHNOLOGIES, INC.
AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 29,2004

BIOPHAN TECHNOLOGIES, INC.AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONTENTS
FEBRUARY 29, 2004

--------------------------------------------------------------------------------

Independent Auditor's Report F-1

Consolidated Financial Statements:

Balance Sheet F-2
Statement of Operations F-3
Statement of Stockholders' Equity F-4
Statement of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-10

INDEPENDENT AUDITOR'S REPORT
------------------------------

To the Board of Directors
Biophan Technologies, Inc.

We have audited the accompanying consolidated balance sheet of Biophan
Technologies, Inc. and Subsidiaries (a development stage company) as of February
29, 2004, and the related consolidated statements of operations, stockholders'
equity, and cash flows for each of the two years in the period then ended, and
the amounts in the cumulative column in the consolidated statements of
operations, stockholders' equity, and cash flows for the period from August 1,
1968 (date of inception) to February 29, 2004. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Biophan
Technologies, Inc. and Subsidiaries as of February 29, 2004 and the results of
their operations and their cash flows for each of the two years in the period
then ended and the amounts included in the cumulative column in the consolidated
statements of operations and cash flows for the period from August 1, 1968 to
February 29, 2004 in conformity with accounting principles generally accepted in
the United States of America.

/s/GOLDSTEIN GOLUB KESSLER LLP
New York, New York

March 30, 2004

Pg. F-1

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED BALANCE SHEET

--------------------------------------------------------------------------------
FEBRUARY 29, 2004
--------------------------------------------------------------------------------

ASSETS

Current assets:
Cash $ 823,900
Investments in marketable securities 1,150,000
Due from related parties 34,222
Prepaid expenses 69,185
--------------------------------------------------------------------------------
Total current assets 2,077,307
--------------------------------------------------------------------------------
Property and equipment, net 61,214
--------------------------------------------------------------------------------

Other assets:
Intellectual property rights 70,000
Security deposit 2,933
Deferred equity placement costs 19,891
Deferred tax asset, net of valuation allowance of $2,926,000 --
--------------------------------------------------------------------------------
92,824
--------------------------------------------------------------------------------
$ 2,231,345
============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses $ 254,058
--------------------------------------------------------------------------------
Total current liabilities 254,058
--------------------------------------------------------------------------------

Stockholders' equity:
Common stock - $.005 par value:
Authorized, 80,000,000 shares
Issued and outstanding, 65,945,011 shares 329,725
Additional paid-in capital 13,339,289
Deficit accumulated during the development stage (11,691,727)
--------------------------------------------------------------------------------
1,977,287
--------------------------------------------------------------------------------
$ 2,231,345
============

See notes to consolidated financial statements

Pg. F-2

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF OPERATIONS

-------------------------------------------------------------------------------------------
Period from
August 1,
1968 (date of
Year ended Year ended inception) to
February 29, February 28, February 29,
2004 2003 2004
-------------------------------------------------------------------------------------------
Revenues:

Development payments $ 75,000 $ -- $ 75,000
-------------------------------------------------------------------------------------------

Operating expenses:
Salaries and related 527,206 648,304 1,697,000
Research and development 1,240,439 1,373,124 3,675,831
Professional fees 705,375 522,115 2,577,091
Write-down of intellectual property rights -- 40,000 530,000
General and administrative 678,422 582,174 1,762,676
-------------------------------------------------------------------------------------------
3,151,442 3,165,717 10,242,598
-------------------------------------------------------------------------------------------
Operating loss (3,076,442) (3,165,717) (10,167,598)
-------------------------------------------------------------------------------------------

Other income (expense):
Interest expense (729,527) (447,853) (1,730,923)
Interest income 1,815 17,083 46,578
Other income 85,584 187,040 314,659
Other expense -- (28,805) (65,086)
-------------------------------------------------------------------------------------------
Total other expense, net (642,128) (272,535) (1,434,772)
-------------------------------------------------------------------------------------------

Loss from continuing operations (3,718,570) (3,438,252) (11,602,370)

Loss from discontinued operations -- -- (89,357)
-------------------------------------------------------------------------------------------

Net loss $ (3,718,570) $ (3,438,252) $(11,691,727)
===========================================================================================
Loss per common share - basic and diluted $ (0.08) $ (0.11)
===========================================================================
Weighted average shares outstanding 44,017,010 31,731,051
===========================================================================

See notes to consolidated financial statements

Pg. F-3

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

--------------------------------------------------------------------------------------------------------
PERIOD FROM AUGUST 1, 1968 (DATE OF INCEPTION) TO FEBRUARY 29, 2004
--------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the Stockholders'
Number Commo Paid-in Development Equity
of Shares Stock Capital Stage (Deficiency)
--------------------------------------------------------------------------------------------------------
1969 - 14,130 shares issued for services

for $.05 per share 14,130 $ 70 $ 637 $ 707

1970 - 1,405,000 shares issued for mining
rights for $.05 per share 1,405,000 7,025 63,225 70,250

1970 - 55,500 shares issued for services
for $.05 per share 55,500 278 2,497 2,775

1973 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 500

1976 - 500 shares issued for services
for $.05 per share 500 3 22 25

1978 - 12,000 shares issued for services
for $.05 per share 12,000 60 540 600

1980 - 225,000 shares issued for services
for $.05 per share 225,000 1,125 10,125 11,250

1984 - 20,000 shares issued for services
for $.05 per share 20,000 100 900 1,000

1986 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 500

1990 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 500

1993 - 25,000 shares issued for services
for $.05 per share 25,000 125 1,125 1,250

Net loss from inception through
February 28, 1998 (89,357) (89,357)
--------------------------------------------------------------------------------------------------------

Balance at February 28, 1998 1,787,130 8,936 80,421 (89,357) --

1999 - 10,000 shares issued for services
for $.05 per share 10,000 50 450 $ 500

1999 - 1,000,000 shares issued for services
for $.005 per share 1,000,000 5,000 5,000
Net loss for the year ended
February 28, 1999 (5,500) (5,500)
--------------------------------------------------------------------------------------------------------

Balance at February 28, 1999 2,797,130 13,986 80,871 (94,857) --

2000 - 1,000,200 shares issued
for services for $.005 per share 1,000,200 5,001 5,001

See notes to consolidated financial statements

Pg. F-4

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY

-------------------------------------------------------------------------------------------------------------------------------
PERIOD FROM AUGUST 1, 1968 (DATE OF INCEPTION) TO FEBRUARY 29, 2004
-------------------------------------------------------------------------------------------------------------------------------
Deficit
Accumulated
Additional During the Stockholders'
Number Common Paid-in Development Equity
of Shares Stock Capital Stage (Deficiency)
-------------------------------------------------------------------------------------------------------------------------------
Net loss for the year ended
February 29, 2000 (5,001) (5,001)
-------------------------------------------------------------------------------------------------------------------------------

Balance at February 29, 2000 3,797,330 18,987 80,871 (99,858) --

2000 - 250,000 shares issued for services
for $.005 per share 250,000 1,250 1,250

2000 - Expenses paid by stockholder 2,640 2,640

2000 - 10,759,101 shares issued for
acquisition of Antisense Technology, Inc 10,759,101 53,795 121,205 175,000

2000 - 10,759,101 shares issued for cash
for $.005 per share 10,759,101 53,796 121,204 175,000

Net loss for the year ended
February 28, 2001 (729,130) (729,130)
-------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 2001 25,565,532 127,828 325,920 (828,988) (375,240)

2001 - 2,399,750 shares issued for cash
for $1.00 per share 2,399,750 11,999 2,387,751 2,399,750

2001 - 468,823 shares issued for interest 468,823 2,344 466,479 468,823

2001 - Redemption of 200,000 shares (200,000) (1,000) (1,000)

2001 - 1,315,334 shares issued upon
conversion of bridge loans at $.75 per share 1,315,334 6,576 979,924 986,500

2001 - Offering costs associated with
share issuances for cash (254,467) (254,467)

2002 - Grant of stock options for services 702,800 702,800

Net loss for the year ended
February 28, 2002 (3,705,917) (3,705,917)
-------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 2002 29,549,439 147,747 4,608,407 (4,534,905) 221,249

2002 - Shares issued for cash for
$.34 per share 993,886 4,969 337,461 342,430

2002 - Shares issued for cash for
$.15 per share 1,192,874 5,964 167,002 172,966

2002 to 2003 - Shares issued for cash for
$.25 per share 5,541,100 27,706 1,357,569 1,385,275

2002 to 2003 - Shares issued as commissions
on offerings 357,394 1,787 (1,787) --

2002 to 2003 Cash commissions on offerings (119,488) (119,488)

Offering costs (45,644) (45,644)

Grant of stock options for services 485,000 485,000

Intrinsic value of beneficial conversion feature
of note payable and MRI liability 800,000 800,000

Net loss for the year ended
February 28,2003 (3,438,252) (3,438,252)
-------------------------------------------------------------------------------------------------------------------------------

Balance at February 28, 2003 37,634,693 188,173 7,588,520 (7,973,157) (196,464)

2003 - Shares issued upon conversion of
related party loans at $.14 per share 1,268,621 6,343 177,607 183,950

2003 - Shares issued upon conversion of
stockholder loan plus accrued interest
at $.20 per share 775,000 3,875 151,693 155,568

2003 - Shares issued for cash pursuant to
equity line of credit at prices from
$.11 to $.23 per share 3,325,757 16,629 474,561 491,190

2003 - Shares issued for option exercises
at $.14 per share 3,000,000 15,000 412,847 427,847

2004 - Shares issued for warrant exercises
at $.25 and $.50 per share 995,940 4,980 327,864 332,844

2004 - Shares issued for cash pursuant to
stock purchase agreement at prices from
$.15 to $.40 per share 11,000,000 55,000 2,845,000 2,900,000

2004 - Shares issued upon conversion of
related party loans at $.10 per share 7,945,000 39,725 754,775 794,500

Offering costs (209,528) (209,528)

Grant of stock options for services 565,000 565,000

Intrinsic value of beneficial conversion feature
of line of credit loans 250,950 250,950

Net loss for the year ended February 29, 2004 (3,718,570) (3,718,570)
-------------------------------------------------------------------------------------------------------------------------------
Balance at February 29, 2004 65,945,011 $ 329,725 $ 13,339,289 $(11,691,727) $ 1,977,287
===============================================================================================================================

See notes to consolidated financial statements

Pg. F-5

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED STATEMENT OF CASH FLOWS

----------------------------------------------------------------------------------------------------------------
Period from
August 1,
1968 (date of
Year ended Year ended inception) to
February 29, February 28, February 29,
2004 2003 2004
----------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:

Net loss $(3,718,570) $(3,438,252) $(11,691,727)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation 23,643 25,601 64,173
Realized and unrealized losses on marketable securities -- 28,805 66,948
Accrued interest on note payable converted to common
stock 11,998 -- 11,998
Amortization of interest on convertible notes payable 667,617 383,333 1,050,950
Write-down of intellectual property rights -- 40,000 530,000
Amortization of discount on payable to related party -- -- 75,000
Issuance of common stock for services -- 101,108
Issuance of common stock for interest -- -- 468,823
Grant of stock options for services 565,000 485,000 1,752,800
Expenses paid by stockholder -- -- 2,640
Changes in operating assets and liabilities:
(Increase) decrease in advances receivable 10,127 (10,127) --
(Increase) in due from related parties (9,854) (24,368) (34,222)
(Increase) decrease in prepaid expenses 21,738 896 (69,185)
(Increase) in security deposits -- -- (2,933)
Increase (decrease)in accounts payable and
accrued expenses (89,158) 214,176 240,727
(Decrease) in due to related parties (9,401) (6,948) (43,496)
----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (2,526,860) (2,301,884) (7,476,396)
----------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:

Purchases of property and equipment (21,625) (7,951) (125,387)
Sales of marketable securities 302,000 540,000 1,219,270
Purchases of marketable securities (1,150,000) (302,000) (2,436,218)
----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) investing activities (869,625) 230,049 (1,342,335)
----------------------------------------------------------------------------------------------------------------

Cash flow from financing activities:

Proceeds of bridge loans -- -- 986,500
Loan from stockholder -- 143,570 143,570
Line of credit borrowing from related party 250,950 300,000 550,950
Line of credit payments (72,500) -- (72,500)
Net proceeds from sales of capital stock 3,252,200 1,735,539 7,363,849
Proceeds from exercise of options 427,847 -- 427,847
Proceeds from exercise of warrants 332,844 -- 332,844
Deferred equity placement costs (19,891) (70,538) (90,429)
----------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,171,450 2,108,571 9,642,631
----------------------------------------------------------------------------------------------------------------

Net increase in cash 774,965 36,736 823,900

Cash at beginning of period 48,935 12,199 --
----------------------------------------------------------------------------------------------------------------
Cash at end of period $ 823,900 $ 48,935 $ 823,900
================================================================================================================

Supplemental schedule of noncash investing and financing activities:

Intellectual property acquired through issuance of common
stock and assumption of related party payable $ -- $ -- $ 175,000
================================================================================================================

Acquisition of intellectual property rights $ -- $ -- $ 425,000
================================================================================================================
Issuance of common stock upon conversion of
bridge loans $ 155,568 $ -- $ 1,142,068
================================================================================================================
Issuance of common stock upon conversion of related
party loans $ 978,450 $ -- $ 978,450
================================================================================================================

See notes to consolidated financial statements

Pg. F-6

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2004

-------------------------------------------------------------------------------

1. PRINCIPAL BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Consolidation

The consolidated financial statements include the accounts of Biophan
Technologies, Inc. ("Biophan") and its wholly owned subsidiaries, LTR Antisense
Technology, Inc.("Antisense")and MRIC Drug Delivery Systems, LLC ("MRIC")
(collectively referred to as the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.

Company History

The Company is in the development stage and is expected to remain so for at
least the next 12 months. The Company is developing technologies that make
biomedical devices safe and compatible for use in an MRI (Magnetic Resonance
Imaging) machine.

The Company was incorporated under the laws of the State of Idaho on August
1,1968. On January 12, 2000, the Company changed its domicile to Nevada by
merging into a Nevada corporation, and on July 19, 2001, changed its name to
Biophan Technologies, Inc.

The Company has not generated any material revenues throughout its history. The
Company's ability to continue in business is dependent upon obtaining sufficient
financing or attaining future profitable operations.

On December 1, 2000, the Company acquired LTR Antisense Technology, Inc., a New
York corporation ("LTR"), from Biomed Solutions, LLC (formerly Biophan, LLC), a
New York limited liability company ("Biomed"), in a share for share exchange. As
a result of the exchange, LTR became a wholly owned subsidiary of the Company.
The exchange was consummated pursuant to and in accordance with an Exchange
Agreement, originally dated December 1, 2000 and subsequently amended, by and
among the Company, LTR and Biomed. LTR owns multiple patents for proprietary HIV
antisense gene therapy technology.

In connection with the exchange, the Company (i) issued an aggregate of
10,759,101 shares of common stock to Biomed in exchange for all the issued
shares of LTR and (ii) issued an aggregate of 10,759,101 shares of common stock
to a group of investors for $175,000. Also on December 1, 2000, the Company
acquired intellectual property rights, including a pending patent to the
MRI-compatible pacemaker technology from Biomed (the "Assignment"), for future
consideration of $500,000 ("MRI technology purchase liability payable"). The
Assignment was consummated pursuant to, and in accordance with, an Assignment
and Security Agreement, originally dated December 1, 2000 and subsequently
amended, by and between the Company and Biomed (See Note 6).

Pg. F-7

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FEBRUARY 29, 2004

--------------------------------------------------------------------------------

Revenue Recognition

The Company earns and recognizes revenue under development agreements when the
phase of the agreement to which amounts relate is completed. Completion is
determined by the attainment of specified milestones including a written
progress report. Advance fees received on such agreements are deferred until
recognized.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly
liquid instruments with an original maturity of three months or less to be cash
equivalents.

Concentration of Credit Risk

The Company maintains cash in bank deposit accounts which, at times, exceed
federally insured limits. The Company has not experienced any losses on these
accounts.

Marketable Securities

Marketable securities that are bought and held principally for the purpose of
selling them in the near term are classified as trading securities. Trading
securities are recorded at fair value, with the change in fair value during the
period included in operations.

Depreciation

Depreciation of property and equipment is provided by the double declining
balance and straight-line methods over the estimated useful lives of the related
assets. Costs for internally developed intellectual property rights with
indeterminate lives are expensed as incurred.

Intangible Assets

At each balance sheet date, the Company evaluates the period of amortization of
intangible assets. The factors used in evaluating the period of amortization
include: (i) current operating results, (ii) projected future operating results,
and (iii) any other material factors that affect continuity of the business.

Deferred Taxes

Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted rates
expected to apply when the differences are expected to be realized. A valuation
allowance is recognized if it is anticipated that some or all of the deferred
tax asset may not be realized.

Loss Per Share

Basic loss per common share is computed by dividing net loss by the weighted-
average number of shares of common stock outstanding during the period. Diluted
loss per common share gives effect to dilutive options, warrants and other
potential common stock outstanding during the period. Potential common stock has
not been included in the computation of diluted loss per share, as the effect
would be antidilutive.

Stock Options

The Company has elected to apply Accounting Principles Board ("APB") Opinion No.
25, Accounting for Stock Issued to Employees, and related interpretations in
accounting for its stock options issued to employees (intrinsic value) and has
adopted the disclosure-only provisions of Statement of Financial Accounting
Standards ("SFAS") No. 123, Accounting for Stock-Based Compensation. Had the
Company elected to recognize compensation cost based on the fair value of the
options granted at the grant date as prescribed by SFAS No. 123, the Company's
net loss and loss per common share would have been as follows:

Year ended February 29 and 28 2004 2003
--------------------------------------------------------------------
Net loss - as reported $(3,718,570) $(3,438,252)

Add: Stock-based employee compensation
expense included in reported net loss,
net of related tax effects 118,000 458,000

Deduct: Total stock-based employee
compensation expense determined
under fair value based method for
all awards, net of related tax effects (241,000) (524,000)
--------------------------------------------------------------------
Net loss - pro forma $(3,841,570) $(3,504,252)
====================================================================
Basic and diluted loss
per share - as reported $ (.08) $ (.11)
====================================================================
Basic and diluted loss
per share - pro forma $ (.09) $ (.11)
====================================================================

The Company's assumptions used to calculate the fair values of options issued
during the year ended February 29, 2004 were (i) risk-free interest rates of
3.17% through 4.38, (ii) expected lives of 5 to 10 years, (iii) expected
volatility of 160%, and (iv) expected dividends of zero.

The Company's assumptions used to calculate the fair values of options issued
during the year ended February 28, 2003 were (i) risk-free interest rates of
3.05% through 4.75%, (ii) expected lives of 5 to 10 years, (iii) expected
volatility of 90%, and (iv) expected dividends of zero.

Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates by management. Actual
results could differ from these estimates.

Accounting Standards

Management does not believe that any recently issued, but not yet effective,
accounting standards, if currently adopted, would have a material effect on the
accompanying financial statements.

Pg. F-8

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2004

-------------------------------------------------------------------------------

2. INVESTMENTS IN MARKETABLE SECURITIES:

Investments in trading securities are summarized as follows at February 29,
2004:

Gross
Unrealized Fair
Cost Gain/Loss Value
--------------------------------------------------------------------------
Certificates of Deposit $1,150,000 $ - $1,150,000
==========================================================================

There were no material unrealized holding losses on trading securities at
February 29,2004.

3. PREPAID EXPENSES:

Prepaid expenses at February 29, 2004 consist of the following:

Prepaid royalties $ 25,000
Prepaid insurance 26,060
Prepaid supplies 18,125
--------------------------------------------------------
$ 69,185
========================================================

4. PROPERTY AND EQUIPMENT:

Property and equipment, at cost, consists of the following:

Depreciation/
Amortization
Period
-----------------------------------------------------------
Furniture & Equipment $58,010 5-7 years
Computers 13,218 5 years
Internet Web site 54,159 7 years
-----------------------------------------------------------
125,387
Less accumulated depreciation (64,173)
-----------------------------------------------------------
$61,214
===========================================================

Depreciation expense for the years ended February 29, 2004 and February 28,2003
amounted to $23,643 and $25,601, respectively. Depreciation expense for the
period from August 1, 1968 (Date of Inception) to February 29, 2004 was $64,173.

5. INTELLECTUAL PROPERTY RIGHTS:

Intellectual property rights were acquired on December 1, 2000 and encompass the
utilization of new proprietary technology to prevent implantable cardiac
pacemakers and other critical and life-sustaining medical devices from being
affected by MRI and other equipment using magnetic fields, radio waves and
similar forms of electromagnetic interference.

6. LOAN AGREEMENTS:

In June 2002, the Company signed a Loan Agreement with a shareholder providing
for borrowings of up to $400,000 with interest payable at 8% per annum.
Principal and accrued interest become due and payable on December 31, 2003. A
total of $143,570 was borrowed under this Agreement and on June 30, 2003 the
shareholder agreed to a conversion offer and the principal balance plus accrued
interest of $11,998 was converted into 775,000 shares of the Company's common
stock.

In June 2002, the Company executed a line-of-credit agreement (the "Line") with
Biomed Solutions, LLC that provided for borrowings up to $250,000 with interest
at 8% per annum. Upon execution of the Line, Biomed received warrants to
purchase 325,000 shares of restricted common stock at $1.00 per share. The
warrants were valued at approximately $234,000 which was recorded as a discount
against the Convertible Promissory Note (the "Note") supporting the Line. At
issuance, the Note was convertible into shares of the Company's common stock, at
a price below the market value of such stock. The intrinsic value of the
beneficial conversion feature of the Note was recorded as an additional
discount, such that the full $250,000 issued was discounted, with a
corresponding increase to additional paid-in capital. On August 19, 2002, the
Line was increased by $100,000 and the expiration date thereof was extended to
August 19, 2003. The payment date of amounts borrowed under the original Line
was extended to December 1, 2002 and later the expiration of the entire line was
extended to June 1, 2004. In consideration for the increase in the Line, Biomed
received 30,000 additional warrants to purchase shares of restricted common
stock at a price dependent on the selling price of the Company's stock, as
defined. The exercise price of the warrants issued to Biomed in exchange for the
increase in the line of credit to $350,000 and the extension of the payment date
to December 1, 2002 is the lowest of (i) the closing bid price on June 4, 2002;
(ii) the closing bid price on the date of exercise; or (iii) the lowest per
share purchase price paid by any third party between June 4, 2002 and the
exercise date. The fair value of the warrants - in accordance with guidance
provided by Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation - was estimated at the date of grant using the
Black-Scholes option pricing model with the following assumptions: risk-free
interest rate of 5.25; no dividend yield; volatility factor of the expected
market price of the company's common stock of 0.0%, and an expected life of 2.8
years. The value attributed to the warrants was insignificant. As a result,
these warrants were allocated no value.

During the current year through January 20, 2004, the Company issued 1,268,621
shares of common stock for the conversion of $183,950 of the Line of Credit
obligation and drew down additional amounts under the Line, which amounts were
also fully discounted as a result of the beneficial conversion feature and
recorded as additional paid-in capital. On January 21, 2004, $294,500 was
outstanding under the Line and $93,200 was converted into 932,000 shares of
common stock. On February 10, 2004, the remaining balance of $201,300 was
converted into 2,013,000 shares of common stock.

Under the Transfer Agreement dated December 1, 2000, the Company incurred a
liability ("MRI technology purchase liability payable") to Biomed of $500,000,
with interest at 8% per annum, in connection with the acquisition of the MRI
intellectual property rights described above. Biomed maintained a security
interest in the underlying patents and the liability was due by June 1, 2004.

In August 2002, in consideration for extending the maturity date to June 1, 2004
and for prior extensions, the Company and Biomed agreed to make the $500,000 MRI
technology purchase liability payable to Biomed convertible at Biomed's election
into shares of the Company's common stock at a price dependent on the selling
price of the Company's stock, as defined, but below market. Consequently, the
intrinsic value of the beneficial conversion feature of the liability was
recorded as a discount, such that the full $500,000 was discounted, with a
corresponding increase to additional paid-in capital. On February 10, 2004, the
entire balance of $500,000 was converted into 5,000,000 shares of common stock.
Of this amount, $300,000 had been transferred to SBI Brightline Consulting, LLC
by Biomed and converted by SBI. Because Biomed effectively acquired $75,950 of
convertible debt by lending that amount during the six months preceding
conversion, under applicable securities laws the Company is entitled to receive
Biomed's profit on $75,590 of the $300,000 transferred to SBI. This profit
approximates $835,000 and will be paid by Biomed as payments are received from
SBI. The Company will record these payments as credits to additional paid-in
capital.

7. STOCKHOLDERS' EQUITY:

During the year ended February 29, 2004, the Company issued 3,325,757 shares of
common stock for gross cash proceeds of $491,190 pursuant to an equity line of
credit agreement with Spectrum Advisors Ltd. and issued 11,000,000 shares for
gross cash proceeds of $2,900,000 pursuant to a stock purchase agreement with
SBI Brightline Consulting, LLC. In addition, 3,000,000 shares of common stock
were issued upon the exercise of options for cash proceeds of $427,847; and
995,940 shares were issued upon the exercise of warrants for cash proceeds of
$332,844.

On February 5, 2004, the Company entered into a second stock purchase agreement
with SBI that obligates SBI to purchase, upon the Company's election, up to
17,750,000 shares of common stock for an aggregate purchase price of $25.0
million. Currently, only 6,000,000 shares covered by the stock purchase
agreement have been registered for resale by SBI under the Security Act as the
Company does not currently have sufficient authorized and unissued shares to
issue such remaining shares to SBI. As a result, SBI will not be obligated to
purchase the remaining shares covered by the stock purchase agreement unless and
until the Company has registered the resale of such shares by SBI. The Company
intends to seek approval at its next annual meeting of stockholders to amend its
articles of incorporation to increase the number of authorized shares. The
purchase of 6,000,000 shares by SBI will result in gross cash proceeds of
$3,900,000 to the Company. Currently, no shares have been purchased by SBI under
the second stock purchase agreement.

During the year ended February 29, 2004, the Company issued 995,940 shares of
stock upon the exercise of warrants for total proceeds of $332,844. As of
February 29, 2004, warrants to purchase 3,930,536 shares of our common stock
were outstanding. The exercise prices for these warrants range from $.10 per
share to $1.00 per share, and the weighted-average exercise price for all of the
outstanding warrants is $.50 per share.

8. COMMITMENTS:

The Company is obligated under an operating lease for office space expiring
September 30, 2004. The Company may terminate the lease upon ninety days prior
written notice to the landlord. The aggregate minimum future payments under

this lease are $33,922 for the year ending February 28, 2005. Rent expense
charged to operations under this operating lease aggregated $57,899 and $51,321
for the years ended February 29, 2004 and February 28, 2003, respectively. Rent
expense charged to operations for the period from August 1, 1968 (Date of
Inception) to February 29, 2004 was $123,887.

In addition, the Company is obligated under three license or royalty agreements
for patents that expire at various dates through 2023. These agreements may be
terminated by the Company with 60 days written notice. Aggregate minimum future
payments under these agreements total $506,000. License/royalty expense charged
to operations was $15,000 for each of the years ended February 29, 2004 and
February 28, 2003.

9. RELATED PARTY TRANSACTIONS:

The Company has affiliations with two entities, Biomed Solutions, LLC ("Biomed")
and Technology Innovations, LLC ("TI"), that are related by virtue of common
management personnel and stock ownership. During the current year, the Company
charged Biomed for services of certain Company personnel and charged both Biomed
and TI for expenses allocable to and paid on their behalf. The total of these
charges was $120,081. During the year ended February 28, 2003, Biomed and TI
paid expenses on behalf of the Company aggregating $128,411. At February 29,
2004, the combined balances due from these related parties was $34,222. The
amounts do not bear interest and the Company expects to collect them in full
during the next twelve months.

10. STOCK-BASED COMPENSATION PLAN:

The Company has a stock option plan (the "Plan") which provides for the granting
of nonqualified or incentive stock options ("ISO") to officers, key employees,
non-employee directors and consultants. The Plan authorizes the granting of
options to acquire up to 7,000,000 common shares. ISO grants under the Plan are
exercisable at the market value of the Company's stock on the date of such
grant. Nonqualified option grants under the Plan are exercisable at amounts
determined by the board of directors. All options under the Plan are exercisable
at times as determined by the board of directors, not to exceed 10 years from
the date of grant. Additionally, the Plan provides for the granting of
restricted stock to officers and key employees.

The following table summarizes activity in stock options:

Weighted-
average
Exercise
Options Price
--------------------------------------------------------
Outstanding at February 28, 2002 1,779,997 .51
Granted 739,998 .42
Forfeited (30,000) .50
Exercised -- --
--------------------------------------------------------
Outstanding at February 28, 2003 2,489,995 .48
Granted 4,469,998 .17
Forfeited (90,000) .30
Exercised (3,000,000) .14
--------------------------------------------------------
Outstanding at February 29, 2004 3,869,993 $ .39
========================================================

Weighted-average fair value of
options granted during the year
ended February 29, 2004 and
February 28, 2003,respectively $.16 .33
========================================================

The following table summarizes information about stock options outstanding
and exercisable at February 29, 2004:

Options Outstanding Options Exercisable
--------------------------------- ----------------------------
Weighted
Average Weighted- Weighted-
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Price Outstanding Life Price Exercisable Price
--------------------------------------------------------------------------------
$.10 - $.43 2,245,000 8.37 years $ .25 1,067,501 $ .27

$.50 - $1.00 1,624,993 6.35 years $ .58 1,366,243 $ .59
--------------------------------------------------------------------------------
$.10 - $1.00 3,869,993 7.52 years $ .39 1,564,661 $ .45
================================================================================

Pg. F-9

BIOPHAN TECHNOLOGIES, INC. AND SUBSIDIARIES
(A DEVELOPMENT STAGE COMPANY)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FEBRUARY 29, 2004

--------------------------------------------------------------------------------

At February 29, 2004, 130,007 shares of common stock were reserved for future
issuance of stock options.

11. INCOME TAXES:

As of February 29, 2004, the Company had net operating loss carryforwards of
approximately 8,607,000 for federal income tax purposes, which expire through
2024.

The reconciliation of income tax computed at the U.S. federal statutory tax
rates to income tax expense is as follows:

Year Ended February 29 and 28, 2004 2003
-----------------------------------------------------------
Tax benefit at U.S. statutory rates 34 % 34 %
Increase in valuation allowance (34)% (34)%
-----------------------------------------------------------
-0-% -0-%
===========================================================

Deferred tax asset is comprised of the following:

February 29, 2004

-----------------------------------------------------------
Net operating loss carryforwards $2,766,000
Write-down of intellectual property rights 160,000
-----------------------------------------------------------

Total deferred tax asset 2,926,000
Valuation allowance (2,926,000)
-----------------------------------------------------------

Net deferred tax asset $ -0-
==========================================================

F-10

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not applicable.

ITEM 8A. CONTROLS AND PROCEDURES.

Based on their evaluation as of the end of the period covered by this annual
report on Form 10-KSB, our principal executive officer and principal financial
officer, with the participation and assistance of our management, concluded that
our disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, were effective in design and
operation. There have been no changes in our system of internal control over
financial reporting in connection with the evaluation by our principal executive
officer and principal financial officer during our fiscal quarter ended February
29, 2004 that have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT.

The officers and directors of Biophan are as follows:

Name Age Title
---- --- -----

Guenter H. Jaensch 65 Chairman of the Board
Michael L. Weiner 56 Director, Chief Executive Officer, President
Robert J. Wood 64 Vice-President, Treasurer, Chief Financial Officer
David A. Miller 49 Secretary (Resigned March 1, 2004)
Jeffrey L. Helfer 51 Vice-President-Engineering
Robert S. Bramson 65 Director
Steven Katz 55 Director
Ross B. Kenzie 72 Director

The above listed officers and directors will serve until the next annual
meeting of the shareholders or until their death, resignation, retirement,
removal, or disqualification, or until their successors have been duly elected
and qualified. Vacancies in the existing Board of Directors may be filled by
majority vote of the remaining directors. Officers serve at the will of the
Board of Directors.

GUENTER H. JAENSCH, PHD is the former Chairman and CEO of Siemens
Pacesetter, Inc., a manufacturer of pacemakers. During his more than twenty-five
years at Siemens, Dr. Jaensch held various senior executive positions prior to
running Siemens Pacesetter, including President of Siemens Communications
Systems, Inc. from August 1983 to March 1985, Chairman and President of Siemens
Corporate Research and Support, Inc., from April 1982 to September 1991 and
Chairman and CEO of Siemens Pacesetter, Inc. and Head of the Cardiac Systems
Division of Siemens AG Medical Engineering Group from October 1991 to September
1994. Dr. Jaensch holds a Masters Degree in Business Administration and a Ph.D.
in Business and Finance from the University of Frankfurt and taught business and
statistics at the University prior to joining Siemens in 1969. In 1994, he
joined St. Jude Medical as Chairman and CEO of Pacesetter, Inc., a St. Jude
Medical Company, and retired in 1995 to manage his personal investments. Since
December 1997 he has been a director of MRV Communications, a publicly traded
company which is a leading company in the fiber optic technology business. Dr.
Jaensch has been a director of Biophan since March 2002.

MICHAEL L. WEINER began his career at Xerox Corporation in 1975, where he
served in a variety of capacities in sales and marketing, including manager of
software market expansion and manager of sales compensation planning. In 1985,
after a ten year career at Xerox, Mr. Weiner founded Microlytics, a Xerox
spin-off company which developed technology from the Xerox Palo Alto Research
Center into a suite of products with licenses to many companies. In January
1995, Weiner co-founded and became CEO of Manning & Napier Information Services,
a Rochester-based company providing patent analytics, prior art searches, and
other services. He held this position until January of 1999. In February 1999 he
formed Technology Innovations, LLC, to develop and expand certain intellectual
property assets. In August, 2000, Technology Innovations, LLC created a
subsidiary, Biomed Solutions, LLC, to pursue certain biomedical and
nanotechnology opportunities. Mr. Weiner serves on the Boards of Biomed
Solutions, LLC, Technology Innovations, LLC, Speech Compression Technologies, LP
(an R&D partnership commenced in 1989 to pursue compression technologies),
Nanoset, LLC, and Nanocomp, LLC. Mr. Weiner holds six issued patents invented
prior to the formation of Biophan which are owned by other companies that
employed Mr. Weiner prior to the formation of Biophan. These patents do not
involve technology that is competing or will compete with Biophan. Mr. Weiner
has been CEO and a director of Biophan since December 2000.

ROBERT J. WOOD is a Certified Public Accountant with extensive experience
in public accounting and business consulting. He began his career at Price
Waterhouse & Co. in 1962 after graduating from St. John Fisher College with a
B.B.A. in Accounting. From 1973 to 2000, he was consecutively owner/partner of
Metzger, Wood & Sokolski, CPAs (through December 1985), Mengel, Metzger, Barr &
Co., LLP (through December 1990), and Wood & Company, CPAs, P.C. (through
November 2000), all in Rochester, New York. In December 2000, his practice was
acquired by a regional CPA firm, Eldredge, Fox and Porretti, LLP and he was
engaged in business consulting until joining Biophan as full-time Chief
Financial Officer in August 2001. Effective March 1, 2004 Mr. Wood was appointed
Secretary. He is a member of the New York State Society of Certified Public
Accountants. A portion of Mr. Wood's time is spent assisting with the fiscal
management of Biomed Solutions, LLC, a related company, for which Biophan is
reimbursed.

STUART G. MACDONALD is experienced in research and development with a
broad engineering and science background, emphasizing a systems approach to
developing complex technology. From January 1995 through December 2000, Mr.
MacDonald was employed at Ortho-Clinical Diagnostics, a Johnson & Johnson
company, in Rochester, New York, holding the position of Director-Engineering
from 1996 to mid-1997 and Vice-president, Clinical Lab Instrumentation R&D from
mid-1997 through December 2000. He was responsible for overall management of the
R&D group, including personnel, administration and financial performance. He
worked at Eastman Kodak Company from 1971 to 1994, rising to the position of
Assistant Director, Clinical Diagnostic Research Labs. Mr. MacDonald has a B.S.
in Mechanical Engineering and Masters of Engineering degree from Cornell
University. He is also licensed as a professional engineer by the State of New
York. Mr. MacDonald was employed by Biophan as Vice-President-Research and
Development in January 2001. A portion of Mr. McDonald's time is spent assisting
with the research program of Biomed Solutions, LLC, a related company, for which
Biophan is reimbursed.

JEFFREY L. HELFER'S background includes 28 years in new product and
technology development, systems management, new business development, and
regulatory affairs, having served in a number of positions at Eastman Kodak
Company for 19 years until November 1994 and from December 1994 to September
2001 at Ortho-Clinical Diagnostics (OCD) in Rochester, New York, a Johnson &
Johnson company. Most recently, he was program director within OCD's Product
Development and Program Management Center of Excellence, where he was
responsible for systems management of OCD's next-generation clinical chemistry
platform. He also held positions as Program Director and Director of Regulatory
Affairs from April 2000 to September 2001, Director of Engineering from January
1997 to March 2000, Director of New Business Development from February 1995 to
December 1996, and headed up multiple international and corporate initiatives to
improve product performance and business processes. He holds a B.S. from
Rochester Institute of Technology and an M.S. from the University of Rochester,
both in Mechanical Engineering. Mr. Helfer is a Johnson & Johnson certified
Design for Six Sigma Black Belt and a New York State Professional Engineer. Mr.
Helfer was employed by Biophan as Vice-President-Engineering in October 2001. A
portion of Mr. Helfer's time is spent assisting with the research program of
Biomed Solutions, LLC, a related company, for which Biophan is reimbursed.

ROBERT S. BRAMSON is an engineer and patent attorney and since 1996 has
been a partner in Bramson & Pressman, a law firm that focuses on patent and
technology licensing matters. Since 1996 he has also been President of VAI
Management Corp., a consulting firm that specializes in patent and technology
licensing. He is former head of the Computer and Technology law group of
Schnader, Harrison, Segal & Lewis (where he worked from 1968 to 1989); former
Vice President and General Patent and Technology Counsel for Unisys (from 1989
to 1990); founder and former CEO of InterDigital Patents Corporation, a patent
licensing company (from 1992 to 1995); former Licensing Counsel for Abbott
Laboratories (from 1963 to 1966); and has been Adjunct Professor of Patent Law,
Computer Law and (presently) Licensing Law at Temple Law School, Rutgers Law
School and Villanova Law School at different times (from 1980 to date). Mr.
Bramson has been a director of Biophan since July 2001.

STEVEN KATZ is President of Steven Katz & Associates, Inc., a
technology-based management consulting firm specializing in strategic planning,
corporate development, new product planning, technology licensing, and
structuring and securing various forms of financing since 1982. From January
2000 until October 2001, Mr. Katz was President and Chief Operating Officer of
Senesco Technologies, Inc., a public company engaged in the development of
proprietary genes with application to agro-biotechnology. From 1983 to 1984 he
was the co-founder and Executive Vice President of S.K.Y. Polymers, Inc., a
biomaterials company. Prior to S.K.Y. Polymers, Inc., Mr. Katz was Vice
President and General Manager of a non-banking division of Citicorp. From 1976
to 1980 he held various senior management positions at National Patent
Development Corporation, including President of three subsidiaries. Prior
positions were with Revlon, Inc. (1975) and Price Waterhouse & Co. (1969 to
1974). Mr. Katz received a Bachelor of Business Administration degree in
Accounting from the City College of New York in 1969. He is presently a member
of the Board of Directors of USA Technologies, Inc., a publicly held
corporation, and several other private companies. Mr. Katz has been a director
of Biophan since July 2001.

ROSS B. KENZIE is a former Chairman and Chief Executive Officer of Goldome
Bank, from which he retired in June 1989. He was previously Executive Vice
President of Merrill Lynch & Co., in the New York worldwide headquarters, and is
a former member of the Merrill Lynch & Co. Board of Directors. He is a former
Director of the Federal Home Loan Bank of New York (from 1984 to 1988) and
served on the boards of the National Council of Savings Institutions (from 1982
to 1986), the Federal Reserve Bank of New York, Buffalo Branch (from 1985 to
1987), and the Savings Banks Association of New York State (from 1984 to 1987).
Mr. Kenzie was a Director of Millard Fillmore Hospitals (from 1982 to 1995)and
is currently Past Chairman Emeritus. He served on the Board of the Kaleida
Health, Education and Research Foundation (from 1998 to 2000) and is currently
on its Investment Committee. He was a Director of the Health Systems Agency of
Western New York (from 1988 to 1991), and was a member of the Western New York
Commission on Health Care Reform (from 1987 to 1990). Mr. Kenzie was a member of
the College Council of the State University College at Buffalo (from 1981 to
1998) and served as Chairman. He was a Director of the College's Foundation and
a member of its Finance Committee (from 1984 to 1998) and is currently on its
Investment Committee. He served on the Council of the Burchfield-Penney Art
Center (from 1990 to 2001) and the Albright Knox Art Gallery (from 1983 to
1985). He is also a member of the Board, and the Chairman of the Investment
Committee of the State University at Buffalo Foundation. Mr. Kenzie currently
serves on the boards of several companies including the publicly held Rand
Capital Corporation and many entrepreneurial ventures that are privately held,
including the Boards of Members of Biomed Solutions LLC and Technology
Innovations, LLC. Mr. Kenzie has been a director of Biophan since December 2000.

COMMITTEES

The Board of Directors has an Audit Committee consisting of Messrs.
Bramson, Katz and Kenzie and a Compensation Committee consisting of Messrs.
Bramson, Katz and Kenzie. The Audit Committee makes recommendations concerning
the engagement of independent public accountants, reviews with the independent
accountants the results of the audit engagement, approves professional services
provided by the accountants including the scope of non-audit services, if any,
and reviews the adequacy of our internal accounting controls. The Board of
Directors has determined that Messrs. Katz and Kenzie, both independent
directors, meet the qualifications as an "audit committee financial expert".

The Compensation Committee makes recommendations to the Board regarding
executive and employee compensation and benefits.

CODE OF ETHICS

The Company has adopted a Code of Ethics for Senior Financial Officers
that is applicable to our principal executive officer, principal financial
officer, principal accounting officer or controller, or persons performing
similar functions. A copy of our Code of Ethics for Senior Financial Officers is
filed as an exhibit to this annual report on Form 10-KSB.

CONFLICTS OF INTEREST

Messrs. MacDonald, Helfer, Wood and other of our employees from time to
time spend a portion of their time on the business affairs of Biomed or its
affiliates, for which Biomed reimburses us a percentage of their salary and
benefits. Our Board of Directors reviews this arrangement on a regular basis.
Currently, Biomed reimburses us for less than 50% of the payroll costs of
Messrs. MacDonald, Helfer, Wood and others. The Board of Directors does not
believe that any conflicts of interest arise as a result of this policy, but it
monitors the relationship on an ongoing basis.

Michael Weiner devotes essentially his full business time to our company.
His employment agreement with us requires a majority of his time, allowing him
to attend to certain administrative duties of Technology Innovations, its
subsidiary, Biomed, and Speech Compression Technologies, LP, an R&D partnership
holding certain assets. Mr. Weiner is a member and the manager of Biomed and of
Technology Innovations. Ross Kenzie, one of the Biophan directors, is on the
Board of Members of each of Technology Innovations and Biomed. Biomed is in the
business of identifying and acquiring technologies in the biomedical field for
exploitation.

Biomed is an investor in Nanoset, and Mr. Weiner serves on the board of
Nanoset. Subsequent to the formation of Nanoset and Mr. Weiner's joining their
board, Mr. Weiner learned that the nanomagnetic particle technology held by
Nanoset might be applicable to the MRI safety goals of Biophan. Mr. Weiner
brought this technology to our attention, and we eventually licensed the
technology from Nanoset. Biomed holds a 33% interest in Nanoset. Our license
agreement with Nanoset was negotiated based on arms-length negotiations. Mr.
Weiner and Mr. Kenzie each abstained from voting on whether to approve the
license agreement.

Biomed is also a 25% investor in Myotech, LLC. Messrs. Weiner, MacDonald
and Helfer serve on the board of managers of Myotech. Myotech is developing a
biomedical device that does not compete with those being developed by us.

Biomed has agreed that all intellectual property developed by the
employees of Biomed that is in the area of MRI Safe and/or Image Compatible
Technology (MRI Technology) and HIV Antisense will be assigned to us. Per this
agreement, MRI Technology means the technology necessary to enable medical
devices to be resistant to radio frequency and static and gradient
electromagnetic fields produced by MRI machines. HIV Antisense is a method of
treating HIV.

Our independent directors will make all determinations and decisions
relating to the issue involving Biomed and its affiliates described above,
without the vote of either Mr. Weiner or Mr. Kenzie. In addition, the Board will
act to ensure that Mr. Weiner and Mr. Kenzie discharge their obligations to us
in accordance with their fiduciary duties to us.

LIMITATION ON LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS

Under Nevada Revised Statutes Section 78.138, a director or officer is
generally not individually liable to the corporation or its shareholders for any
damages as a result of any act or failure to act in his capacity as a director
or officer, unless it is proven that:

o his act or failure to act constituted a breach of his fiduciary
duties as a director or officer; and

o his breach of those duties involved intentional misconduct, fraud or
a knowing violation of law.

This provision is intended to afford directors and officers protection
against and to limit their potential liability for monetary damages resulting
from suits alleging a breach of the duty of care by a director or officer. As a
consequence of this provision, stockholders of Biophan will be unable to recover
monetary damages against directors or officers for action taken by them that may
constitute negligence or gross negligence in performance of their duties unless
such conduct falls within one of the foregoing exceptions. The provision,
however, does not alter the applicable standards governing a director's or
officer's fiduciary duty and does not eliminate or limit the right of Biophan or
any stockholder to obtain an injunction or any other type of non-monetary relief
in the event of a breach of fiduciary duty.

As permitted by Nevada law, Biophan's By-Laws include a provision which
provides for indemnification of a director or officer by us against expenses,
judgments, fines and amounts paid in settlement of claims against the director
or officer arising from the fact that he was an officer or director, provided
that the director or officer acted in good faith and in a manner he or she
believed to be in or not opposed to our best interests. Biophan has purchased
insurance under a policy that insures both Biophan and its officers and
directors against exposure and liability normally insured against under such
policies, including exposure on the indemnities described above. Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.

SCIENTIFIC ADVISORY BOARD

From time to time, we call upon the advice of members of our Scientific
Advisory Board who currently serve without fixed cash compensation but are each
entitled to receive 8,333 options upon completion of each year of membership.
The members of our Board are:

BRADFORD C. BERK, M.D., PH.D. - Since 1998, Dr. Berk has been Director,
Center of Cardiovascular Research; Paul N. Yu Professor and Chief of Cardiology;
Charles A. Dewey Professor and Chairman of Medicine, University of Rochester
Medical Center. Dr. Berk has clinical expertise in adult cardiology and
scientific expertise in cardiovascular medicine, particularly vascular biology.

HERBERT A. HAUPTMAN, PH.D. - In 1970, Dr. Hauptman joined the
crystallographic group of the Hauptman-Woodward Medical Research Institute
(formerly the Medical Foundation of Buffalo) of which he became Research
Director in 1972. He currently serves as President of the Hauptman-Woodward
Medical Research Institute as well as Research Professor in the Department of
Biophysical Sciences and Adjunct Professor in the Department of Computer Science
at the University of Buffalo. He was awarded the 1985 Nobel Prize in Chemistry
and was elected to the National Academy of Sciences in 1988.

KEVIN PARKER, M.S., PH.D. - Dean Parker is a Professor of Electrical and
Computer Engineering, Radiology, and Bioengineering at the University of
Rochester. In 1998, Dr. Parker was named Dean of the School of Engineering and
Applied Sciences.

HENRY M. SPOTNITZ, M.D. - Since 1994, Dr. Spotnitz has been Vice-Chairman,
Research and Information Systems Department of Surgery at Columbia Presbyterian
Medical Center.

JIANHUI ZHONG, PH.D. - Professor Zhong joined the University of Rochester
in 1997 and is currently an Associate Professor of Radiology, Physics, and
Biomedical Engineering, and Director of the MRI Research Group at the University
Medical Center.

SPECIAL CONSULTANT TO THE SCIENTIFIC ADVISORY BOARD

RAY KURZWEIL, B.S. - Founder, Chairman, and CEO of Kurzweil Technologies,
Inc., a technology development company, since 1995. President Clinton awarded
Mr. Kurzweil the National Medal of Technology in 1999, for his invention of the
Kurzweil Reading Machine for the Blind. Mr. Kurzweil was inducted into the
National Inventor's Hall of Fame in 2002, and received the Lemelson-MIT Prize in
2001. Mr. Kurzweil also developed Kurzweil Voice Recognition System, and
Kurzweil Music Synthesizer.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires our executive officers and directors and persons who
own more than ten percent of our common stock to file reports of ownership and
changes in ownership with the SEC. Such executive officers, directors and
greater than ten percent stockholders are also required by SEC rules to furnish
us with copies of all Section 16(a) forms they file. Based solely on
representations from certain reporting persons, we believe that, with respect to
the year ended February 29, 2004, all filings applicable to our executive
officers, directors and ten percent stockholders required by Section 16(a) have
been made.

ITEM 10. EXECUTIVE COMPENSATION

The following table summarizes the annual compensation paid to our named
executive officers during the three years ended February 29, 2004:

Securities
Underlying
Name and Principal Position Year Salary options/SARs
--------------------------- ------- -------- ------------
Michael L. Weiner, CEO 2/29/04 $175,000 300,000
Michael L. Weiner, CEO 2/28/03 $175,000 250,000
Michael L. Weiner, CEO 2/28/02 $150,600 --
Robert J. Wood, CFO 2/29/04 $129,000 125,000
Robert J. Wood, CFO 2/28/03 $109,461 50,000
Stuart G. MacDonald,
Vice-President-Research 2/29/04 $153,846 200,000
Stuart G. MacDonald,
Vice-President-Research 2/28/03 $116,057 100,000
Jeffrey L. Helfer,
Vice-President-Engineering 2/29/04 $153,846 200,000
Jeffrey L. Helfer,
Vice-President-Engineering 2/28/03 $113,461 100,000

Columnar information required by Item 402(a)(2) of Regulation SB has been
omitted for categories where there has been no compensation awarded to, earned
by, or paid to, the named executive officers required to be reported in the
table during fiscal years 2002 through 2004.

STOCK OPTIONS

On June 22, 2001, the Board of Directors adopted the Biophan Technologies,
Inc. 2001 Stock Option Plan. The Option Plan was amended on August 20, 2003. The
Option Plan provides for the grant of incentive and non-qualified stock options
to selected employees, the grant of non-qualified options to selected
consultants and to directors and advisory board members. The Option Plan is
administered by the Compensation Committee of the Board of Directors and
authorizes the grant of options for 7,000,000 shares. The Compensation Committee
determines the individual employees and consultants who participate under the
Plan, the terms and conditions of options, the option price, the vesting
schedule of options and other terms and conditions of the options granted
pursuant thereto. Non-employee directors participate pursuant to the formula set
forth in the Option Plan. Each director receives an initial grant of options to
purchase 20,000 shares, vesting on the first anniversary of the grant, and
additional grants of options to purchase 20,000 shares on each succeeding
anniversary of such director's election. On October 31, 2003, the board of
directors made a special, one-time grant of options to purchase 60,000 shares to
each non-employee director. As of February 29, 2004, we had granted options to
purchase 6,869,993 shares of common stock under the option plan and 3,869,993
were outstanding.

The following table summarizes information concerning stock options
granted to the named executive officers during the last completed fiscal year
ended February 29, 2004:

Percent of
Number of total
securities options/SARs Exercise
underlying granted to or base
options/SARs employees in price Expiration
Name granted (#) fiscal year ($/Sh) date
--------------------- ------------ -------------- --------- -------------
Michael L. Weiner 300,000 31.58% $.18 10/31/13
Robert J. Wood 125,000 13.16% $.18 10/31/13
Stuart G. MacDonald 200,000 21.05% $.18 10/31/13
Jeffrey L. Helfer 200,000 21.05% $.18 10/31/13

No named executive officer exercised options in the fiscal year ended
February 29, 2004. The following table presents the number and values of
exercisable and unexercisable options as of February 29, 2004:

Number of
securities Value of
underlying unexercised
unexercised in-the-money
Shares options/ SARs at options/SARs at
acquired FY-end (#) FY-end ($)
on Value Exercisable/ Exercisable/
Name exercise realized Unexercisable Unexercisable
-------------------- --------- ---------- ------------------ ------------------
Michael L. Weiner None -- 401,667/308,333 $384,750/$296,750
Robert J. Wood None -- 124,583/150,417 $100,787/$137,963
Stuart G. MacDonald None -- 176,667/223,333 $146,100/$208,900
Jeffrey L. Helfer None -- 156,667/243,333 $131,900/$223,100

EMPLOYMENT AGREEMENTS

Each of Michael L. Weiner, President and Chief Executive Officer; Stuart
G. MacDonald, Vice President of Research and Development; Robert J. Wood,
Treasurer and Chief Financial Officer; and Jeffrey L. Helfer, Vice President of
Engineering has entered into employment agreements with Biophan.

Mr. Weiner's employment agreement has an initial term of three years with
subsequent one-year renewal periods. His employment agreement may be terminated
by us for cause or upon his death or disability. In the event of the disability
of Mr. Weiner, termination of his employment agreement by us following a change
in control or termination of his employment agreement by him for good reason,
Mr. Weiner is entitled to receive (i) the unpaid amount of his base salary
earned through the date of termination; (ii) any bonus compensation earned but
not yet paid; and (iii) a severance payment equal to one (1) year of his then
current salary. In addition, Mr. Weiner will be immediately vested in any
options, warrants, retirement plan or agreements then in effect. Good Reason
means (i) a material change of Mr. Weiner's duties, (ii) a material breach by us
under the employment agreement, or (iii) a termination of Mr. Weiner's
employment in connection with a change in control.

As used in Mr. Weiner's employment agreement, "change in control" means
(1) our merger or consolidation with another entity where the members of our
Board do not, immediately after the merger or consolidation, constitute a
majority of the Board of Directors of the entity issuing cash or securities in
the merger or consolidation immediately prior to the merger or consolidation, or
(2) the sale or other disposition of all or substantially all of our assets.

In the event of termination for cause, all of Mr. Weiner's unexercised
warrants and options, whether or not vested, will be canceled, and Mr. Weiner
will not be eligible for severance payments. In the event of voluntary
termination, all of Mr. Weiner's unvested warrants and options will be canceled
and he will have three (3) months from the date of termination to exercise his
rights with respect to the unexercised but vested options. He will not be
eligible for severance payments.

The employment agreements for each of Messrs. MacDonald, Wood and Helfer
are terminable by either us or the employee upon 30 days' notice or by us for
cause (as defined in their employment agreements) or upon the death or
disability of the employee. However, each of them is entitled to receive
severance equal to six months' base salary, payable in six equal consecutive
monthly installments in the event that the employee is terminated by us within
ninety (90) days following a change in control. In addition, under such
circumstances each of them will be immediately vested in any options, warrants,
retirement plan or agreements then in effect.

For purposes of the employment agreements for Messrs. MacDonald, Wood and
Helfer, "change in control" means (1) on the date of the merger or consolidation
of Biophan with another entity where the members of the Board of Directors,
immediately prior to the merger or consolidation, would not, immediately after
the merger or consolidation, constitute a majority of the Board of Directors of
the entity issuing cash or securities in the merger or consolidation; (2) on the
date Michael L. Weiner is terminated as CEO of the Company; or (3) on the date
of the sale or other disposition of all or substantially all of the assets of
Biophan.

In the event of termination for cause, all unexercised warrants and
options held by the applicable employee, whether or not vested, will be canceled
and the employee will not be eligible for severance payments. In the event of
voluntary termination, all unvested warrants and options will be canceled and
the employee will have three (3) months from the date of termination to exercise
his rights with respect to the unexercised but vested options.

COMPENSATION OF THE BOARD OF DIRECTORS

Directors who are also our employees do not receive additional
compensation for serving on the Board or its committees. Non-employee directors,
for their services as directors, are paid an annual cash fee of $3,500 and a
per-meeting fee of $1,000. Dr. Jaensch receives an additional $1,000 per month
for serving as Chairman of the Board. In addition, non-employee directors
receive options under our Stock Option Plan. All directors are reimbursed for
their reasonable expenses incurred in attending Board meetings. Steven Katz
receives an additional $3,000 per year for serving as Chairman of the Audit
Committee. Otherwise, no additional compensation is paid to any director for
serving as a member of any committee of the Board. We maintain directors and
officers liability insurance.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

The table below lists the beneficial ownership of our common stock, as of
February 29, 2004, by each person known by us to be the beneficial owner of more
than 5% of our common stock, by each of our directors and officers and by all of
our directors and officers as a group.

Name and Address of Number of Shares
Beneficial Owner Beneficially Owned Percent of Class(2)
(1)(2)
---------------------------- ------------------- --------------------

+Guenter H. Jaensch (3) 801,667 1.21%
964 Allamanda Drive
Delray Beach, FL 33483

+Michael L. Weiner (4) 7,058,029 10.44%
693 Summit Drive
Webster, NY 14580

Name and Address of Number of Shares
Beneficial Owner Beneficially Owned Percent of Class(2)
(1)(2)
---------------------------- ------------------- --------------------
Wilson Greatbatch (5) 4,944,461 7.46%
5935 Davison Road
Akron, NY 14001

+Robert S. Bramson (6) 65,000 *
1100 East Hector Street
Suite 410
Consohocken, PA 19428

+Ross B. Kenzie (7) 65,000 *
Cyclorama Bldg. Suite 100
369 Franklin Street
Buffalo, NY 14202

+Steven Katz (8) 120,000 *
20 Rebel Run Drive
East Brunswick, NJ 08816

Robert J. Wood (9) 214,583 *
12 Peachtree Lane
Pittsford, NY 14534

Stuart G. MacDonald (10) 266,667 *
4663 East Lake Road
Pultneyville, NY 14538

Jeffrey H. Helfer (11) 306,667 *
1153 Hidden Valley Trail
Webster, NY 14580

David A. Miller 100,500 *
4004 Sunnyside Road
Sandpoint, ID 83864

Technology Innovations, 5,656,501 8.43%
LLC(12)
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586

Biomed Solutions, LLC(13) 5,355,857 7.98%
150 Lucius Gordon Drive
Suite 215
West Henrietta, NY 14586

All Officers and Directors as 8,998,113 13.05%
a group (9 persons)

----------
* Denotes less than one percent.
+ Denotes Member of the Board of Directors.

(1) Except as may be set forth below, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them.

(2) Applicable percentage of ownership is based on 65,945,011 shares
outstanding as of February 29,2004, together with applicable options for
such shareholder. Beneficial ownership is determined in accordance with
the rules of the SEC and includes voting and investment power with respect
to shares. Shares subject to options or warrants currently exercisable or
exercisable within 60 days after February 29, 2004 are included in the
number of shares beneficially owned and are deemed outstanding for
purposes of computing the percentage ownership of the person holding such
options or warrants, but are not deemed outstanding for computing the
percentage of any other stockholder.

(3) Includes 501,667 shares issuable upon exercise of options and warrants
granted to Dr. Jaensch.

(4) Michael L. Weiner is a member and the manager of Technology Innovations,
LLC, which is the majority owner of Biomed Solutions, LLC. Mr. Weiner is
also the Manager of Biomed. Mr. Weiner's calculation includes 4,175,857
shares owned beneficially and of record by Biomed and 300,644 shares owned
beneficially and of record by Technology Innovations. Includes 1,180,000
shares issuable upon exercise of warrants held by Biomed and 491,667
shares issuable upon exercise of options held by Mr. Weiner.

(5) Includes 4,459,468 shares owned of record and beneficially by Greatbatch
Gen-Aid, Ltd., an entity owned by Wilson Greatbatch, and 109,993 shares
owned by E. & W.G. Foundation, a private foundation of which Mr.
Greatbatch is co-trustee. Also includes 225,000 shares issuable upon
exercise of options held by Mr. Greatbatch and 150,000 shares issuable
upon exercise of warrants held by Mr. Greatbatch.

(6) Includes 65,000 shares issuable upon exercise of options held by Mr.
Bramson.

(7) Includes 65,000 shares issuable upon exercise of options held by Mr.
Kenzie. Does not include shares owned beneficially or of record by Biomed
or by Technology Innovations. Mr. Kenzie is the Manager and an equity
member of Biophan Ventures, LLC, which is the 43% equity member in Biomed;
he is also the Manager of Patent Ventures LLC, which is the Class A Member
of Technology Innovations. Mr. Kenzie and Mr. Weiner comprise the Board of
Members of Biomed; Mr. Kenzie serves on the Board of Members of Technology
Innovations.

(8) Includes 120,000 shares issuable upon exercise of options held by Mr.
Katz.

(9) Includes 154,583 shares issuable upon exercise of options and warrants
held by Mr. Wood.

(10) Includes 206,667 shares issuable upon exercise of options and warrants
held by Mr. MacDonald.

(11) Includes 206,667 shares issuable upon exercise of options and warrants
held by Mr. Helfer.

(12) Includes 4,175,857 shares owned beneficially and of record by Biomed and
1,180,000 shares issuable upon exercise of warrants held by Biomed.
Technology Innovations, LLC is the majority owner of Biomed Solutions,
LLC.

(13) Includes 1,180,000 shares issuable upon exercise of warrants held by
Biomed.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

(1) Michael L. Weiner, President and Chief Executive Officer of Biophan,
is the Manager and a 42.7% equity member of Technology Innovations, LLC., a 57%
equity member of Biomed Solutions, LLC (formerly Biophan, LLC). Mr. Weiner is
also the Manager of Biomed. He and Ross Kenzie make up the Board of Members of
Biomed. Biomed is the record owner of 662,857 shares of common stock of Biophan;
Technology Innovations is the record owner of 300,644 shares of common stock of
Biophan. As Manager of Technology Innovations and Biomed, Mr. Weiner has control
over these entities. Mr. Weiner is also on the board of Nanoset, LLC, an entity
owned in part by Biomed Solutions, and with which we have entered into a
technology license agreement.

(2) On December 1, 2000, Biomed received 10,759,101 shares of Biophan's
common stock in exchange for its shares of LTR Antisense Technology, Inc. Most
of those shares have been distributed to the members of Biomed and their
members.

(3) On December 1, 2000, Biomed transferred its MRI-compatible pacemaker
patent pending and related technology to Biophan for a future payment of
$500,000. This obligation bears interest at 8% per annum from February 28, 2002,
and has been extended several times, to June 1, 2004. After June 1, 2004,
principal and interest are payable in 12 equal monthly installments. Since
November 30, 2002, this entire obligation has been convertible into common
shares of Biophan at a conversion price equal to the lowest of (i) the closing
bid price on June 4, 2002; (ii) the closing bid price on the date of exercise;
or (iii) the lowest per share purchase price paid by any third party between
June 4, 2002 and the exercise date. On February 10, 2004, Biomed transferred
$300,000 of this obligation to SBI Brightline Consulting, LLC and converted the
remaining balance of $200,000 into shares of our common stock common. On the
same date, SBI converted the $300,000 obligation transferred to it into shares
of our common stock.

(4) On June 4, 2002, we executed a line of credit agreement with Biomed
providing for borrowings up to $250,000. On August 19, 2002, the line was
increased by $100,000 and the expiration date thereof for that portion of the
line was set at August 19, 2003. The payment date of amounts borrowed under the
original line was extended to December 1, 2002. On November 7, 2002, the
maturity date of the line was extended until such time as the financing
contemplated by the Spectrum stock purchase agreement commenced. It was later
extended to June 1, 2004. On February 10, 2004, all outstanding balances under
the line of credit were converted to common stock in accordance with the terms
of the credit agreement.

(5) Biomed holds warrants to purchase a total of 1,180,000 shares of our
common stock. On March 1, 2001, it received warrants to purchase 200,000 shares
at an exercise price of $1.00 in consideration of management effort and expense
incurred on our behalf. On June 4, 2002, it received warrants to purchase
100,000 shares at an exercise price of $1.00 in consideration of the extension
of the due date for the Transfer Agreement payment, and warrants to purchase
75,000 shares at an exercise price of $1.00 in consideration of the grant of the
line of credit. (Wilson Greatbatch also received 150,000 warrants in
consideration of the extension of the due date of the Transfer Agreement
payment). On August 19, 2002, Biomed received warrants to purchase 30,000 shares
in consideration of the increase in the line of credit commitment, and warrants
to purchase 275,000 shares for additional extensions of the payment terms of the
Transfer Agreement payment. On that date, the exercise price for all 680,000
warrants then held by Biomed was set at the lowest of (i) the closing bid price
on June 4, 2002; (ii) the closing bid price on the date of exercise; or (iii)
the lowest per share purchase price paid by any third party between June 4, 2002
and the exercise date. On November 7, 2002, Biomed was granted warrants to
purchase an additional 500,000 shares at an exercise price of $.50 per share in
consideration of another extension of the Transfer Agreement payment. Each
extension of the Transfer Agreement payment enabled us to retain the
MRI-compatible technology that we acquired under the Transfer Agreement. In
connection with each issuance of warrants to Biomed, our board of directors
determined, without the vote of Mr. Weiner or Mr. Kenzie, that the consideration
received by us was fair and adequate consideration for the warrants issued.

(6) During the year ended February 29, 2004, the Company charged Biomed
for services of certain Company personnel and charged both Biomed and Technology
Innovations for expenses allocable to and paid on their behalf. The total of
these charges was $120,081. During the year ended February 28, 2003, Biomed and
Technology Innovations paid expenses on our behalf aggregating $128,411. These
advances did not bear interest and were subsequently repaid.

(7) On January 1, 2001, Wilson Greatbatch was granted 250,000 options at
an exercise price of $.50 for his consulting services to us and 8,333 options at
an exercise price of $.50 as former Chairman of the Scientific Advisory Board.
As a consultant Mr. Greatbatch assisted us in the development of our photonic
pacemaker by providing design and engineering services. The board of directors
determined that the value of the consulting services was fair and adequate
consideration for the options issued. We recorded compensation expense of $9,200
with respect to those options. Through his ownership of Greatbatch Gen-Aid, Ltd.
and his co-trusteeship of a private foundation, E.& W.G. Foundation, he is the
beneficial owner of 4,919,509 common shares of our common stock. He also
received consideration from Biomed in connection with transfer of the
MRI-compatible pacemaker technology to Biophan. On June 4, 2002, he received
warrants to purchase 150,000 shares of our common stock with an exercise price
of $1.00 in consideration of the extension of the payment due under the Transfer
Agreement. Greatbatch Gen-Aid holds a 3.5% membership interest (11 Units) in
Technology Innovations.

On February 28, 2001, we entered into a research and development agreement
with Greatbatch Enterprises Corporation. Mr. Greatbatch is the CEO and majority
stockholder of Greatbatch Enterprises. Under the agreement, Greatbatch
Enterprises undertook certain technology development and testing, for which we
paid Greatbatch Enterprises an aggregate of $297,000. The agreement terminated
in December 2002 with the completion of animal testing by Greatbatch
Enterprises.

(8) On March 1, 2002, Dr. Guenter H. Jaensch was granted options to
purchase 250,000 shares at an exercise price of $.10 per share and on July 16,
2002 was granted additional options to purchase 100,000 shares at an exercise
price of $.43 per share, in each case for consulting services he provided to us.
As a consultant, Dr. Jaensch assisted us in developing our strategic plan,
attended trade shows, and arranged and met with potential customers and
strategic partners. The Board of Directors determined that the value of the
consulting services was fair and adequate consideration for the options issued.
We valued the options at $36,900 and $592,500, respectively.

(9) All transactions discussed above are considered by the Board of
Directors to have been consummated on terms approximately equivalent to those
that might have prevailed in arms-length transactions with unaffiliated parties
under similar circumstances.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibit Index

No.
----

2.1 Articles of Merger Incorporated by reference
to Exhibit 3.2 to Biophan's
Form 10-KSB for the year
ended February 29, 2000
(the "2000 10-KSB")
2.2 Articles of Dissolution Incorporated by reference
to Exhibit 3.3 to the 2000
10-KSB
2.3 Exchange Agreement, dated as of Incorporated by reference
December 1, 2000, by and among to Exhibit 2.3 to Biophan's
Biophan, Biomed Solutions, LLC Registration Statement on
(formerly Biophan, LLC), and LTR Form SB-2 (File No.
Antisense Technology, Inc. 333-102526) (the "Prior
Registration")
3.1 Articles of Incorporation (Nevada) Incorporated by reference
to Exhibit 3.1 to the 2000
10-KSB
3.2 Bylaws (Nevada) Incorporated by reference
to Exhibit 3.2 to Biophan's
Form 10-SB filed on May 13,
1999.
3.3 Amendment to the Articles of Incorporated by reference
Incorporation to Exhibit 3.1(i) to
Biophan's Form 8-K, filed
December 15, 2000.
3.4 Amendment to Exchange Agreement Incorporated by reference
to Exhibit 2 to Biophan's
Form 10-KSB for the year
ended February 28, 2001 and
filed as an exhibit to Form
SB-2a on May 1, 2003.
3.5 Certificate of Amendment to Incorporated by reference
Articles of Incorporation to Exhibit 3.1(i) to
Biophan's Form 8-K on
August 27, 2001.
4.1 Stock Purchase Warrant between Incorporated by reference
Biophan and Biomed Solutions, LLC to Exhibit 4.1 to
(formerly Biophan, LLC) dated June Biophan's Form 10-QSB for
4, 2002 the period ended May 31,
2002.
4.2 Stock Purchase Warrant between Incorporated by reference
Biophan and Bonanza Capital to Exhibit 4.2 to
Masterfund Ltd. Biophan's Form 10-QSB for
the period ended May 31,
2002.

4.3 Restated Stock Purchase Warrant Incorporated by reference
between Biophan and Biomed to Exhibit 4.3 to
Solutions, LLC, dated January 8, Biophan's Form 10-QSB for
2003 the period ended November
30, 2002.
4.4 Stock Purchase Warrant between Incorporated by reference
Biophan and Biomed Solutions, LLC to Exhibit 4.4 to
dated November 11, 2002 Biophan's Form 10-QSB for
the period ended November
30, 2002.

4.5 Form of Stock Purchase Warrant Incorporated by reference
issued to principals of Carolina to Exhibit 4.5 to
Financial Services, for a total of Biophan's Form 10-QSB for
121,572 shares the period ended November
30, 2002.

4.6 Form of Stock Purchase Warrant to Incorporated by reference
be issued to Carolina Financial to Exhibit 4.6 to
services in connection with the Biophan's Form 10-QSB for
Stock Purchase Agreement with the period ended November
Spectrum Advisors, Ltd 30, 2002.

4.7 Form of Stock Purchase Warrant Incorporated by reference
issued to investors in private to Exhibit 4.7 to
placement of securities, for a Biophan's Form 10-QSB for
total of 2,770,550 shares the period ended November
30, 2002.

4.8 Stock Purchase Warrant issued to Incorporated by reference
SBI USA, LLC to Exhibit 4.8 to
Biophan's Form 10-QSB for
the period ended November
30, 2002.
4.9 Registration Rights Agreement Incorporated by reference
dated February 10, 2004 by and to Exhibit 4.9 to
among Biophan Technologies, Inc., Biophan's Registration
Biomed Solutions, LLC and SBI Statement on Form SB-2
Brightline Consulting, LLC (File No.333-112678) (the
"2004 Registration").

10.1 Assignment, dated as of December Incorporated by reference
1, 2000, by and between Biophan to Exhibit 10.1 to
and Biomed Solutions, LLC Biophan's Form 8-K, filed
(formerly Biophan, LLC), a New December 15, 2000.
York limited liability company
10.2 Security Agreement, dated as of Incorporated by reference
December 1, 2000, by and between to Exhibit 10.2 to
Biophan and Biomed Solutions, LLC Biophan's Form 8-K, filed
(formerly Biophan, LLC), a New December 15, 2000.
York limited liability company
10.3 Transfer Agreement Incorporated by reference
to Exhibit 99.1 to
Biophan's Form 10-KSB for
the year ended February
28, 2001.
10.4 Amendment to Transfer Agreement Incorporated by reference
to Exhibit 99.2 to
Biophan's Form 10-KSB for
the year ended February
28, 2001.
10.5 Line of Credit Agreement between Incorporated by reference
Biophan and Biomed Solutions, LLC to Exhibit 10.1 to
dated June 4, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.6 Convertible Promissory Note Incorporated by reference
between Biophan and Biomed to Exhibit 10.2 to
Solutions, LLC dated June 4, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.7 Loan Agreement between Biophan and Incorporated by reference
H. Deworth Williams dated June 18, to Exhibit 10.3 to
2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.

10.8 Stock Purchase Agreement between Incorporated by reference
Biophan and Bonanza Capital to Exhibit 10.4 to
Masterfund LTD Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.9 Escrow Agreement between Biophan, Incorporated by reference
Bonanza Capital Masterfund LTD and to Exhibit 10.5 to
Boylan, Brown, Code, Vigdor & Biophan's Form 10-QSB for
Wilson LLP the period ended May 31,
2002.
10.10 Registration Rights Agreement Incorporated by reference
between Biophan and Bonanza to Exhibit 10.6 to
Capital Masterfund LTD Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.11 Executive Employment Agreement Incorporated by reference
between Biophan and Michael L. to Exhibit 10.7 to
Weiner dated December 1, 2000 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.12 Executive Employment Agreement Incorporated by reference
between Biophan and Jeffrey L. to Exhibit 10.8 to
Helfer dated June 6, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.13 Executive Employment Agreement Incorporated by reference
between Biophan and Stuart G. to Exhibit 10.9 to
MacDonald dated June 6, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.14 Executive Employment Agreement Incorporated by reference
between Biophan and Robert J. Wood to Exhibit 10.10 to
dated June 6, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.15 Financial Accommodations Agreement Incorporated by reference
between Biophan and Bellador to Exhibit 10.11 to
(Labuan) Ltd dated July 1, 2002 Biophan's Form 10-QSB for
the period ended May 31,
2002.
10.16 Stock Purchase Agreement between Incorporated by reference
Biophan and Spectrum Advisors, Ltd. to Exhibit 10.16 to
Biophan's Form 10-QSB for
the period ended November
30, 2002.
10.17 Escrow Agreement between Biophan, Incorporated by reference
Spectrum Advisors, Ltd. and to Exhibit 10.17 to
Boylan, Brown, Code, Vigdor & Biophan's Form 10-QSB for
Wilson LLP. the period ended November
30, 2002.
10.18 Registration Rights Agreement Incorporated by reference
between Biophan and Spectrum to Exhibit 10.18 to
Advisors, Ltd. Biophan's Form 10-QSB for
the period ended November
30, 2002.
10.19 Lease Agreement between Biophan Incorporated by reference
and High Technology of Rochester, to Exhibit 10.19 to
Inc. Biophan's Form SB-2a on
March 14, 2003.
10.20 Strategic Partnership Agreement Incorporated by reference
between Biophan and UB Business to Exhibit 10.20 to
Alliance dated December 10, 2001 Biophan's Form SB-2a on
March 14, 2003.
10.21 License Agreement between Biophan, Filed as Exhibit 10.50 to
Xingwu Wang and Nanoset, LLC dated Biophan's Form SB-2 filed
January 15, 2004 on October 9, 2003.
10.22 Patent License Agreement between Incorporated by reference
Biophan and Deborah D. L. Chung to Exhibit 10.22 to
dated April 5, 2002 Biophan's Form SB-2a on
March 14, 2003.
10.23 License Agreement between Biophan Incorporated by reference
and Johns Hopkins University to Exhibit 10.23 to
Biophan's Form SB-2a on
March 14, 2003.
10.24 Advisory Agreement between Biophan Incorporated by reference
and SBI USA, LLC dated December to Exhibit 10.24 to
18, 2002 Biophan's Form SB-2a on
March 14, 2003.

10.25 Development Agreement between Incorporated by reference
Biophan and Alfred University to Exhibit 10.25 to
dated February 21, 2002 Biophan's Form SB-2a on
March 14, 2003.
10.26 Development Agreement between Incorporated by reference
Biophan and Alfred University to Exhibit 10.26 to
dated January 24, 2003 Biophan's Form SB-2a on
March 14, 2003.
10.27 First Amendment to Restated Stock Incorporated by reference
Purchase Agreement between Biophan to Exhibit 10.27 to
and Spectrum Advisors, Ltd. Biophan's Form SB-2a on
March 14, 2003.
10.28 Development Agreement between Incorporated by reference
Biophan and Greatbatch to Exhibit 10.28 to
Enterprises, Inc., dated February Biophan's Form SB-2a on
28, 2001 May 1, 2003.
10.29 Assignment of Patent No: Incorporated by reference
60,269,817, by and between Biophan to Exhibit 10.29 to
and Michael L. Weiner, Wilson Biophan's Form SB-2a on
Greatbatch, Patrick R. Connelly, May 1, 2003.
and Stuart G. MacDonald
10.30 Assignment of Patent No: Incorporated by reference
10,077,988, by and between Biophan to Exhibit 10.30 to
and Patrick R. Connelly, Michael Biophan's Form SB-2a on
L. Weiner, Stuart G. MacDonald, May 1, 2003.
Thomas H. Foster, Wilson
Greatbatch, and Victor Miller
10.31 Assignment of Patent No: Incorporated by reference
10,077,836, by and between Biophan to Exhibit 10.31 to
and Michael L. Weiner, Stuart G. Biophan's Form SB-2a on
MacDonald, and Patrick R. Connelly May 1, 2003.
10.32 Assignment of Patent No: Incorporated by reference
10,077,823, by and between Biophan to Exhibit 10.32 to
and Patrick R. Connelly, Michael Biophan's Form SB-2a on
L. Weiner, Jeffrey L. Helfer , May 1, 2003.
Stuart G. MacDonald, and Victor
Miller
10.33 Assignment of Patent No: Incorporated by reference
10,077,978, by and between Biophan to Exhibit 10.33 to
and Michael L. Weiner, Jeffrey L. Biophan's Form SB-2a on
Helfer, Stuart G. MacDonald, May 1, 2003.
Patrick R. Connelly, and Victor
Miller
10.34 Assignment of Patent No: Incorporated by reference
10,078,062, by and between Biophan to Exhibit 10.34 to
and Michael L. Weiner, Patrick R. Biophan's Form SB-2a on
Connelly, Stuart G. MacDonald, May 1, 2003.
Jeffrey L. Helfer, Victor Miller
10.35 Assignment of Patent No: Incorporated by reference
10,077,932, by and between Biophan to Exhibit 10.35 to
and Michael L. Weiner, Jeffrey L. Biophan's Form SB-2a on
Helfer, Patrick R. Connelly, May 1, 2003.
Stuart G. MacDonald, and Victor
Miller
10.36 Assignment of Patent No: Incorporated by reference
10,077,887, by and between Biophan to Exhibit 10.36 to
and Michael L. Weiner, Jeffrey L. Biophan's Form SB-2a on
Helfer, Patrick R. Connelly, May 1, 2003.
Stuart G. MacDonald, and Victor
Miller
10.37 Assignment of Patent No: Incorporated by reference
10,077,883, by and between Biophan to Exhibit 10.37 to
and Michael L. Weiner, Jeffrey L. Biophan's Form SB-2a on
Helfer, Patrick R. Connelly, May 1, 2003.
Stuart G. MacDonald, and Victor
Miller
10.38 Assignment of Patent No: Incorporated by reference
10,077,958, by and between Biophan to Exhibit 10.38 to
and Michael L. Weiner, Jeffrey L. Biophan's Form SB-2a on
Helfer, Patrick R. Connelly, May 1, 2003.
Stuart G. MacDonald, and Victor
Miller

10.39 Assignment of Patent No: Incorporated by reference
10,077,888, by and between Biophan to Exhibit 10.39 to
and Patrick R. Connelly, Stuart G. Biophan's Form SB-2a on
MacDonald, and Michael L. Weiner May 1, 2003.
10.40 Assignment of Patent No: Incorporated by reference
60,357,935, by and between Biophan to Exhibit 10.40 to
and Jeffrey L. Helfer, Robert W. Biophan's Form SB-2a on
Gray, and Michael L. Weiner May 1, 2003.
10.41 Assignment of Patent No: Incorporated by reference
10,132,457, by and between Biophan to Exhibit 10.41 to
and Stuart G. MacDonald, Jeffrey Biophan's Form SB-2a on
L. Helfer, and Michael L. Weiner May 1, 2003.
10.42 Assignment of Patent No: Incorporated by reference
09,864,944, by and between Biophan to Exhibit 10.42 to
and Wilson Greatbatch, Patrick R. Biophan's Form SB-2a on
Connelly and Michael L. Weiner May 1, 2003.
10.43 Assignment of Patent No: Incorporated by reference
09,865,049, by and between Biophan to Exhibit 10.43 to
and Victor Miller, Wilson Biophan's to Form SB-2a on
Greatbatch, Patrick R. Connelly May 1, 2003.
and Michael L. Weiner
10.44 Assignment of Patent No: Incorporated by reference
09,885,867, by and between Biophan to Exhibit 10.44 to
and Wilson Greatbatch, Patrick R. Biophan's Form SB-2a on
Connelly and Michael L. Weiner May 1, 2003.
10.45 Assignment of Patent No: Incorporated by reference
09,885,868, by and between Biophan to Exhibit 10.45 to
and Victor Miller, Wilson Biophan's Form SB-2a on
Greatbatch, Patrick R. Connelly May 1, 2003.
and Michael L. Weiner
10.46 Assignment of Patent No: Incorporated by reference
10,283,530, by and between Biophan to Exhibit 10.46 to
and Wilson Greatbatch and Michael Biophan's Form SB-2a on
L. Weiner May 1, 2003.
10.47 Assignment of Patent No: Incorporated by reference
10,369,429, by and between Biophan to Exhibit 10.47 to
and Jeffrey L. Helfer, Robert W. Biophan's Form SB-2a on
Gray, and Michael L. Weiner May 1, 2003.
10.48 Assignment of Patent No: Incorporated by reference
10,162,318, by and between Biophan to Exhibit 10.48 to
and Biomed Solutions, LLC Biophan's Form SB-2a on
May 1, 2003.
10.49 Strategic Partnership Agreement Incorporated by reference
between Biophan and UB Business to Exhibit 10.49 to
Alliance dated May 27, 2003. Biophan's Form SB-2a on
July 11, 2003.
10.50 Development Agreement between Filed as Exhibit 10.51 to
Biophan and Alfred University Biophan's Form SB-2 filed
dated July 17, 2003 on October 9, 2003.
10.51 Stock Purchase Agreement dated Incorporated by reference
October 1, 2003 between Biophan to Exhibit 10.50 to
and SBI Brightline Consulting, LLC. Biophan's Registration
Statement on Form SB-2.
10.52 Stock Purchase Agreement dated Incorporated by reference
February 5, 2004 between Biophan to Exhibit 10.52 to the
and SBI Brightline Consulting, LLC. 2004 Registration
Statement.
10.53 2001 Stock Option Plan Incorporated by reference
to Exhibit 10.53 to the
2004 Registration
Statement.
10.54 Letter Agreement dated August 19, Incorporated by reference
2002 between Biomed Solutions, LLC to Exhibit 10.54 to the
and Biophan 2004 Registration
Statement.
14.1 Code of Ethics for Senior Filed herewith.
Financial Officers

21 Subsidiaries Incorporated by reference
to Exhibit 21 to Biophan's
Form 10-KSB for the year
ended February 28, 2001.
23.1 Consent of Frank G. Shellock Filed as an exhibit to Form
SB-2/a on March 14,2003.
23.2 Consent of Robert Rubin M.D. Filed as an exhibit to Form
SB-2/a on March 14,2003.
31.1 Certification of C.E.O. pursuant Filed herewith
to Rule 13a-14(a)
31.2 Certification of C.F.O. pursuant Filed herewith
to Rule 13a-14(a)
32.1 Certification of C.E.O. Pursuant Filed herewith.
to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
32.2 Certification of C.F.O. Pursuant Filed herewith.
to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K

Not applicable

Item 14. Principal Accountant Fees and Services

(1) Audit Fees

The aggregate fees billed by Goldstein Golub Kessler LLP, our
principal accountants, for professional services rendered for the audits
of the Company's annual financial statements for the last two fiscal years
and for the reviews of the financial statements included in the Company's
quarterly reports on Form 10-QSB and for services in connection with SEC
registration statements during the last two fiscal years ended February
29, 2004 and February 28, 2003 was $69,386 and $41,500 respectively.

(2) Audit-Related Fees

The Company did not engage its principal accountants to provide
assurance and related services during the last two fiscal years.

(3) Tax Fees

The Company did not engage its principal accountants to provide tax
compliance, tax advice and tax planning services during the last two
fiscal years.

(4) All Other Fees

The Company did not engage its principal accountants to render
services to the Company during the last two fiscal years, other than as
reported above.

(5) Pre-approval Policies and Procedures

In accordance with its charter, the Audit Committee is required to
approve all audit and non-audit services provided by the independent
auditors and shall not engage the independent auditors to perform the
specific non-audit services proscribed by law or regulation.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

BIOPHAN TECHNOLOGIES, INC.

By: \s\ Michael L. Weiner
-----------------------
Name: Michael L. Weiner
Title: President, CEO and Director

Dated: May 13, 2004

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated.

Signature Title Date
--------- ----- -------------

\s\ Michael L. Weiner President, CEO and Director May 13, 2004
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Michael L. Weiner (Principal Executive Officer)

\s\ Robert J. Wood Vice President, Secretary, Treasurer
------------------ and CFO May 13, 2004
Robert J. Wood (Principal Financial
and Accounting Officer)

\s\ Ross B. Kenzie Director May 13, 2004
---------------------
Ross B. Kenzie

\s\ Steven Katz Director May 13, 2004
---------------------
Steven Katz

\s\ Robert S. Bramson Director May 13, 2004
---------------------
Robert S. Bramson